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Update week ended 27 October 2010

27th October 2010

PAYE hot potato

You may be receiving the form P800.

If the form shows that you have under £300 outstanding (per tax year) – the good news is that the tax is written off (see our 16 Sep blog).

If under £2,000 (in total for both fiscal years) you will receive a P2 form detailing how much is collected through the payroll. Please scan and email to your accountant!

If over £2,000, you will be asked to pay in a lump sum in 2011. However, if you have genuine hardship a 3 year instalment plan may be negotiated.

In our opinion, double check the forms as they have been known to be incorrect! This includes wrong national pensions, rental income, interest, benefits in kind; incorrect grouping together of pension/salary; no basic rate extension for higher rate tax payers who made gift/pension contributions; no married couple allowances.

Also, if the tax were due by 31 Jan 2006 (or earlier) the ordinary deadline for collection has passed (the deadline is 4 years from the original date of collection)!

Understanding P800

Wrong computations

Is your trading company worth little?

If you formed a company and still retain shares from the start (i.e. a subscriber) and find that the company has little or no value you have the following options.

1. Pre-liquidation you can make a claim to move the capital loss uo to 2 years before the tax year of the claim (you are effectively “selling” the shares at a loss.)

2. If the shares are trading (i.e. not an investment/rental company) you can offset the capital loss against income tax! Since 11 October 2010, you can not only claim shares in your own name, but also if you hold them jointly with your spouse/CP – or if held by a nominee on your behalf. EIS (Enterprise Investment Scheme) shares are treated in the same way.


Recent change in HMRC practice/treatment

ITA 2007 s 131

Are you non-resident?

A useful form is R43 – this allows a non resident person to claim UK personal allowances – and needs to be submitted within 4 years of the tax year-end.

Probably you would be taxed in your “new” country as well. You may receive either credit relief (i.e. the lesser of the 2 taxes is waived) or have a special tax treaty in place i.e. your new country and the UK decide who has the right to tax!

R43

Tax Treaties

Partnership tax issues

Until now, registering partnerships and LLPs for tax have been painful for many.

A new partnership form can be sent to CAAT (as of this week). Hopefully the process will improve. Even better news: if forming an LLP Companies House directly tell HMRC about the partnership so you avoid the hassle of notifying 2 bodies.

Regarding lateness – partnerships have more draconian rules than individuals. Whereas an individual can have his/her £100 penalty waived if there is no tax to pay, partners in a partnership cannot. Each partner has to pay £100 and there is no “get out”.

The bad news: unlike for sole traders and companies you cannot use the free software on HMRC’s website to submit tax returns. You need to pay for a piece of 3rd party software (or submit paper returns by the 31 October deadline). If you post this near to the deadline, and HMRC receive it a day or two late, you ought to avoid a penalty.

New registration forms

Registering a partner

Partner who is a company

More good news: your accountant may get his/her HMRC account manager

Small businesses are different to large businesses in the sense that you do not have a dedicated person at HMRC in charge of your tax – no personal service. Neither did your accountant have one on your behalf.

Although they will still not talk to you individually (without going through a call centre) they will now potentially talk to your accountant. These Agent Account managers (AAMs) will help your accountant solve client-specific problems which are HMRC related.

There is no “catch” other than that your accountant has to register the AAM service. He can contact the AAM using up to 1999 characters with the online form. Also, the AAM form is only intended as a last resort.

Using AAM

Pitfalls with authorising your accountant for online VAT

Paper-based VAT returns are being phased out (completely by 2012). However, if you wish to submit them paper-based through your accountant you must use the paper 64-8 form to authorise him. An online authorisation form forces you to submit your VAT forms online. In our opinion online is better, faster and less hassle in any case.

VAT for accountants

Authorising an accountant

Previous experience of an accountant

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“This information is taken from Mark Lee’s weekly practical tax newsletter, published by the Tax Advice Network, for which you can subscribe at http://www.taxadvicenetwork.co.uk”