"Taxing Times" - Tips and Advice

  • File your Self-Assessment return on time. Don't forget, 100 fine if you file your 2005/2006 return after the 31 January 2007.
  • Pay your Self-Assessment tax on time and save yourself automatic penalties and interest. If you are one month late the Inland Revenue will increase the tax due by 5%, a late payment penalty. Interest will run from the due date, 31 January or 31 July.
  • July Tax Instalments - are you paying too much? If your taxable income has reduced this last tax year 2005/2006, compared to 2004/2005, you may be able to make a claim to reduce your payments on account due 31 July 2006. Please call and we will advise.
  • File your corporation tax returns on time. Filing date is 12 months after the accounting year-end. Make sure that we have all the necessary information to file your return in good time.
  • File your tax return quickly if you have tax to pay. You will know well in advance how much to put by and when the payment is due.
  • Self-employed or in partnership? Don't forget that you will pay tax on your profits, not on the money you draw out.
  • Zero Tax for Small Companies. Small Limited Companies will only pay tax if their profit exceeds 10,000! However, To qualify for the zero tax band from the 1 April 2004 you must retain the profits your company makes. If you distribute the profits as dividends you will pay tax at 19%.
  • NIC - New 100 Fine! Beware this new fine. Persons commencing self-employment after the 31 January 2001 have 3 months to register before the fine is triggered. Please let us know if you are newly self-employed and we will deal with the formalities.
  • Include a claim for a proportion of your mortgage interest, as well as cleaning, gas and electricity, if you work from home.
  • VAT - Defer Registration. If you are starting up a new business there may be a way to avoid vat registration for a period if the circumstances of your business are appropriate. This will especially benefit service trades to the general public with low vatable purchases.
  • VAT - Reconcile sales for year with your VAT Returns. Every quarter when you fill in box 6 on your return, "Total value of sales" you are giving the VAT man a valuable piece of information. When he comes along for the periodic visit he will add up the value of sales you have returned and compare them with your accounts. If the sales in your accounts are higher than the outputs, sales declared on your VAT returns then watch out. He will seek to raise an additional assessment.
  • Entertaining customers in the UK is no longer a tax deductible expense, but if you are registered for VAT there are circumstances when you are allowed to claim back the input tax on your share of the bill.
  • Capital Allowances - From the 6 April 2005 you can now only claim a 40% initial write down for any qualifying equipment purchase, including computers. (but see below!)
  • Tax Relief for purchase of Fuel-Efficient Equipment. you can claim a 100% write down, or capital allowance for tax purposes.
  • Valuing Stock to save tax. If your tax bill for the year is looking decidedly on the high side, take a fresh look at your stock valuation at the end of the year. Stock should have been valued at cost, but can be valued at net realiseable value if this is a lower figure. In simple language this means valued at what you could get for it. Lowering the value of stock will for reduce taxable profits.
  • Watch out for the contractor trap. You may consider a freelance worker self-employed but the Inland Revenue may not, and guess who is liable to pay the tax and NIC if the taxman proves to be right. This is the very latest area to go under the Inland Revenue microscope. If you work with self-employed workers check out their status with a specialist advisor. A little attention now, utilising proper contracts, may save you an expensive tax and NIC bill.
  • Keep all those business receipts. If you want to be sure that an expense is verifiable, keep the receipt/invoice. However getting a receipt from a parking meter when you are visiting a customer can prove difficult. So speak to your accountant at the year-end and make sure he has a list of all those items that are not recorded in your books because you couldn't obtain a formal receipt, i.e. car parking, car washing, laundry and cleaning of overalls and so on. As long as the expense is commercially justifiable there should be no problem incorporating the estimated items.