May 2008 Newsletter

FOREWORD

WELCOME TO PRIME CHARTERED ACCOUNTANTS (PRIME) MAY E-NEWS.

Was it “nice” for you? …. I was reflecting on the “Gloomy” Governor’s announcement yesterday that the “nice” decade is over.

By now we are all aware that we are in the midst of an economic down-turn, but I thought that it was a strange term to use to describe the past decade.

To be fair to Mr King, his statement is justified and we are facing tougher times. Mr King stated “we are travelling along a bumpy road as the economy rebalances”. Well, as we travel along that bumpy road with “Miserable Mervyn” remember don’t panic, we are not in a recession, merely a slow-down and things are expected to pick up again in 2009.

As ever, I hope our May e-news gives you some helpful advice and tips. If you require any further assistance, do not hesitate to call us.

Laurence Moore
Partner, Prime Chartered Accountants

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P11D deadline looming

The forms P11D, which report employees and directors’ benefits in kind and expenses, are due for submission by 6 July 2008 for the year ended 5 April 2008. The process of tracking down the information can take some time, so it is important that you don’t leave things until the last minute.

Some things to be aware of:

Company cars

The benefit is based on a percentage of the list price plus accessories – not what the business paid for the car. The percentage is linked to the CO2 emissions of the car.

Provision of fuel

Employees provided with free fuel for private as well as business motoring will be assessed on a further benefit. This is calculated as a percentage linked to the CO2 emissions of the car and a set figure of £14,400 for 2007/08.

The set figure has increased to £16,900 for 2008/09. This is a good time to check whether or not the individual would be better off paying for their own private fuel. Don’t forget that the employer also pays 12.8% employer only Class 1A NIC on the value of broadly all benefits in kind so there is a saving for the business as well.

We have a computer model which calculates whether it is more tax efficient for your business to own your car or for you to own it privately. If you want us to run your details through it, contact Paislei White-Grantham in our Coventry office on 024 7655 4310 or Debbie Charlton in our Solihull office on 0121 711 2468 and they will email you a questionnaire.

HMRC have issued the usual guidance to employers on the completion of the forms P11D together with tips on how to avoid errors based on last years forms P11D.

If you would like any help with the completion of the forms P11D, or a reminder of the information we require to complete the forms on your behalf, please get in touch. Contact Sarah Nickols in our Coventry on 024 7655 4310 or Jan Hornby in our Solihull office on 0121 711 2468.

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Employees entitled to know more

The Information and Consultation of Employees Regulations 2004 have been extended to cover undertakings with 50 or more employees from 6 April 2008.

Under the Regulations, employees have the right to be:

• informed about the company's economic situation;
• informed and consulted about employment prospects; and
• informed and consulted about decisions likely to lead to substantial changes in work organisation or contractual relations.

There is no automatic requirement to negotiate an Information & Consultation (I&C) agreement but employers are required to negotiate an I&C agreement if at least 10% of employees - subject to a minimum of 15 employees - make a formal request for an I&C agreement. Alternatively, employers can choose to start negotiations themselves.

To read more about the requirements under the regulations visit the links below.

Internet link: BERR guidance and Business link

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Tax Hell

Nick Morgan, a journalist, has kept a blog at http://www.tax-hell.co.uk/ detailing his dealings with the Inland Revenue when they investigated his accounts. Apart from making interesting reading, it is confirmation of how cost-effective our fee protection insurance is in times like this. Our Solihull office sent premium notices out to their business clients in January and Coventry office sent theirs out last month. If you want more details about this please contact one of the Partners.

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VAT Flat rate scheme

It can be beneficial for businesses with a turnover of less than £150,000 to use the flat rate scheme. As the eligibility ceiling has been raised significantly this year, please contact us if you would like us to work out whether you would benefit from this – you may pay less VAT over in total; it does not affect how you invoice customers.

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VAT Cash accounting

With the Banks tightening their lending criteria and customers taking longer to pay, it may also be worthwhile considering whether your business could benefit from the cash accounting scheme.

What are the advantages of using the cash accounting scheme?

• automatic bad debt relief - because output tax is never declared until a payment is made by the customer
• cash flow benefits by delaying payment of output tax from invoice date until payment is made by a customer
• the scheme is of particular benefit (for cash flow purposes) to a business that gives extended credit terms to its customers in relation to standard rated sales.

What are the disadvantages of using the cash accounting scheme?

• input tax cannot be claimed until payment is made to a supplier
• the scheme will not benefit a business where most/all sales are zero-rated e.g. a milkman
• the scheme will not benefit a business where sales are paid for, either in advance of invoicing, or at the same time a sales invoice is raised.

Contact us if you would like us to carry out a review to see whether your business cashflow would benefit from adopting this scheme.

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Checking national insurance and VAT numbers

Certain PAYE returns (P35, P11D) will be rejected by HMR&C if a National Insurance number (NINO) is incorrectly displayed. Valid numbers always follow the same format, two letters, followed by six numbers, followed by a single letter. i.e. AB123456D.

The following information sets out the valid alpha prefixes and suffixes. If you are at all uncertain that you have been given a correct NINO, you should check with your local tax office.

Valid National Insurance Number Prefixes:

AA, AB, AE, AH, AK, AL, AM, AP, AR, AS, AT, AW, AX, AY, AZ BA, BB, BE, BH, BK, BL, BM, BT CA, CB, CE, CH, CK, CL, CR EA, EB, EE, EH, EK, EL, EM, EP, ER, ES, ET, EW, EX, EY, EZ GY HA, HB, HE, HH, HK, HL, HM, HP, HR, HS, HT, HW, HX, HY, HZ JA, JB, JC, JE, JG, JH, JJ, JK, JL, JM, JN, JP, JR, JS, JT, JW, JX, JY, JZ KA, KB, KE, KH, KK, KL, KM, KP, KR, KS, KT, KW, KX, KY, KZ LA, LB, LE, LH, LK, LL, LM, LP, LR, LS, LT, LW, LX, LY, LZ MA, MW, MX NA, NB, NE, NH, NL, NM, NP, NR, NS, NW, NX, NY, NZ OA, OB, OE, OH, OK, OL, OM, OP, OR, OS, OX PA, PB, PC, PE, PG, PH, PJ, PK, PL, PM, PN, PP, PR, PS, PT, PW, PX, PY RA, RB, RE, RH, RK, RM, RP, RR, RS, RT, RW, RX, RY, RZ SA, SB, SC, SE, SG, SH, SJ, SK, SL, SM, SN, SP, SR, SS, ST, SW, SX, SY ,SZ TA, TB, TE, TH, TK, TL, TM, TP, TR, TS, TT, TW, TX, TY, TZ WA, WB, WE, WK, WL, WM, WP YA, YB, YE, YH, YK, YL, YM, YP, YR, YS, YT, YW, YX, YY, YZ ZA, ZB, ZE, ZH, ZK, ZL, ZM, ZP, ZR, ZS, ZT, ZW, ZX, ZY

The characters D, F, I, Q, U and V are not used as either the first or second letter of a National Insurance Number prefix.

Valid National Insurance Number Suffixes:

The final alpha of the NINO should be A, B, C, or D.

VAT Registration numbers

There are occasions when the validity of a VAT registration number is critical. Particularly:

• When you make a supply to a registered European Union trader, or
• When you receive an invoice from a supplier on which VAT has been added.

Supply to EU trader

If it appears that the VAT number you have been given may be incorrect, you should charge VAT rather than exempt the supply.

Purchase of goods/services from registered UK trader.

One of the aspects that qualifies a supply for a reclaim of input tax charged, is if the invoice shows a valid VAT registration number. Although HMR&C have discretion to allow a deduction even if the number is wrong, the discretion only applies in certain circumstances.

How to check a VAT registration number.

There are two ways to check the validity of a VAT number:

• Call HMR&C on 0845-010-9000
• A more hi-tech solution, visit the Europa web site at http://ec.europa.eu/taxation_customs/vies/vieshome.do, select the correct member state and enter the VAT number you have been given. This will only confirm if the number is a valid registration number. There is no way to use this service to confirm the number belongs to your customer/supplier.

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Self-employed national insurance contributions – what are they worth?

Clients often ask about the types of state benefits they will not be able to claim if they are self-employed and pay the basic Class 2, and the earnings related Class 4 contributions.

Class 2 contributions will qualify you for most of the benefits that an employed person can claim. (Employed persons pay Class 1 contributions.) The two main exceptions are earnings related state pension and contribution-based Jobseekers allowance.

If you are self-employed and are unable to work due to illness you should be able to claim incapacity benefit. However, you may disqualify yourself if you make occasional visits to your workplace. You may also have difficulties, if you work from home, proving that you do no work.

Class 4 contributions do not count towards any benefits.

Retirement pension

Two useful points. You may be able to combine your contribution record with your husband's, wife's or civil partner's contribution record if:

• you are widowed
• you are the surviving partner of a civil partner who has died
• you are divorced
• your civil partnership has been dissolved.

The number of years contributions required to qualify you to a basic state retirement pension is 30 years, if you are due to reach retirement age on or after 6 April 2010.

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Solihull Business Academy

Finally, a big thank you to all our guests who attended the inaugural Solihull and South Birmingham Business Academy. The event was a tremendous success, with approximately 100 guests attending to see the marvellous Paul McGee present his S.U.M.O (Shut Up and Move On) principles.

If you would like to find out more about our Business Academies, please contact Wendy Tipler.

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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.