The View from No 50

 

 

 

 

May 2010

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925

Email:  keith@kpbonney.co.uk

www.kpbonney.co.uk

 

 


TIME TO PAYE UP

 

Up until now small employers have generally been able to pay PAYE late without incurring a penalty.  With effect from 2010/11 all employers who fail to pay their PAYE on time will have to pay a penalty.

 

The first late payment in the year is penalty free.

 

The second late payment attracts a penalty of 1% of the late payment.

 

The third late payment attracts a penalty of 2% and so on up to 4%.

 

There is also a penalty of 5% for any PAYE paid more than six months late and a further 5% penalty for PAYE paid more than twelve months late.

 

Our Advice: At these rates it is cheaper to borrow from the bank than HMRC so our advice is to pay on time.

 

As cheques are subject to the vagaries of the postal system it is better to make payment by electronic means if possible.

 

If you are having difficulty making your PAYE payment contact the Business Payment Support Service (0845 302 1435) before the tax falls due for payment.  If you can agree a payment arrangement and stick to it you will not be charged penalties.

 

 

HMRC USING DATA FROM LAND REGISTRY

 

HMRC is actively using information received from the Land Registry to check the accuracy of tax returns filed by property owners.

 

The disposal of one’s main residence is usually exempt from tax but other sales such as second homes and buy to let properties may be subject to capital gains tax.

 

And it might be worse than that.  If you buy a property with a view to selling it on, as opposed to owning it as an investment, you could be chargeable to income tax rather than capital gains tax on your profit.  That could result in a massive increase in your tax bill.

 

To rub salt in to the wounds HMRC will seek a tax geared penalty for failure to disclose the profit.

 

Indeed when you have paid your tax and your penalty you might not have a profit at all.

 

Our Advice:  If you have sold an interest in land and have made a taxable profit and have not disclosed the profit on your return you should consider making an unprompted disclosure now before HMRC opens an enquiry.  Properly managed, an unprompted disclosure can secure a penalty outcome of nil.

 

 

THE HAZEL BLEARS TAX PAYMENT PRETENCE?

 

Remember her waving around that tax cheque in front of the television cameras?

 

According to the media she had flipped her second home and made a capital gain.

 

Of course the purpose of the gesture was to make Joe Public think she was coming clean and paying her tax.  On that level the gesture probably worked.

 

But did she really come clean?

 

And had she made a taxable gain in any event?

 

The truth is we just don’t know.

 

Self assessment works like this.  You file a tax return.  The return is in effect a self billing invoice.   You are saying to the tax man this is the amount of tax I owe.

 

If you then pay the tax man more than the amount shown to be due by your return he holds that money on your self assessment account and either applies it against your next return or repays it to you.

 

So the real question is did Hazel file an amended tax return to declare her previously undeclared capital gain?  If not, then by now she has probably got her money back.

 

We shall never know.

 

But the real irony is this.  In flipping her second home Hazel took advantage of a planning technique which is so well known and practised that it is endorsed in the HMRC Capital Gains Tax Manual.  You might consider it morally wrong but it is legal.  The only reason for Hazel to pay the tax would be if she or her accountant messed up and failed to make the right elections.   So is that the answer?  Someone messed up?  Unlikely.

 

Or is it that she felt she was morally wrong to employ the technique and that a gesture was called for?  A gesture which she perhaps knew wouldn’t cost her a penny?

 

Smoke and mirrors.

 

 

AND THEN THERE’S LORD ASHCROFT

 

Born in Chichester to a mother born in Burnley and a father born in Bolton.  Educated in England.  Now sitting in the House of Lords having promised to be a long term resident of the UK.

 

How on earth can Lord Ashcroft be non-domiciled?

 

Why on earth would he announce just weeks ahead of a general election that he is non-domiciled?

 

Clearly there are some serious undisclosed facts here.

 

Why is ‘non-dom’ status important?  It is important because individuals who are not domiciled in the UK do not have to pay UK tax on their overseas income.  Neither do they have to pay inheritance tax on their foreign assets.

 

Domicile is a most adhesive status.  It is very difficult to shed the domicile we acquire at birth.  At birth we acquire the domicile of the person on whom we are dependent.  When we reach the age of 16 we can acquire a different domicile by settling in another country.  But it is not as easy as that.  In order to acquire a new domicile we have to provide strong evidence that we intend to live in the new country permanently or indefinitely.  The following factors are relevant

 

Intentions

Permanent residence

Business interests

Family and social interests

Ownership of property

The form of any Will made

 

Given the known facts it is difficult to understand how Lord Ashcroft can be non-domiciled.  But then we don’t know what the Revenue’s take is on this.  Perhaps they will contest his claim to be non-domiciled.  Now that would be an interesting day in court.

 

More intrigue.

 

Like a Hazel Blears cheque, perhaps a Lord Ashcroft statement is not all it appears to be?

 

 

GIVING IT AWAY AND THROWING IT AWAY

The Charities Aid Foundation estimates that higher rate taxpayers are missing out on over £250m of tax relief on their charitable donations.

Higher-rate taxpayers claimed £280m in tax relief on donations in 2008/09. However, research published by the Foundation in 2009 found that around half of all higher rate taxpayers were not aware that they could reclaim 20% personal tax relief on their charitable donations in their self-assessment tax returns. This suggests that half of this tax relief is lost each year.

How can people be so careless?

As the highest rate of tax increases from 40% to 50% it becomes even more important for top rate taxpayers to claim all the relief to which they are entitled.

Our Advice:  If you pay tax at 40% or 50% make sure you record all your Gift Aid payments and enter them on your tax return.

 

 

DOCTOR DOCTOR

 

A woman went to see her doctor as she wasn't feeling well.  The doctor examined her and then said, “I have some bad news for you.  You only have six months to live.”

 

“Oh doctor, what should I do?” asked the woman.

 

“Marry a Sunderland fan,” replied the doctor.

 

“Will that make me live longer?” asked the woman.

 

“No,” said the doctor, “but it will SEEM longer.”

 

Copyright:  K P Bonney & Co LLP 2010.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

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