The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley† LS29 6JA
Tel:† 01943 870933
Fax:† 01943 870925
TAX RETURN MANANA
Are you one of those people who leave your tax return until the last minute?
Are you not unduly concerned about a £100 penalty for filing your return late?†
Perhaps you are satisfied you have paid all the tax you owe and are not therefore liable to a penalty.
Time to wake up!† The rules have changed.†
From February 2012 all late electronic tax returns attract a penalty whether you have paid your tax or not.† And the penalty levels have increased.
Return not† Penalty due†††††††††††††††† Min††† Max
1 Feb††††††††† £100††††††††††††††††††††††††† £100† £100
30 Apr†††††††† £10 per day from††††††† £10†† £900
†††††††††††††††††† 1 May to 31 July
31 Jul††††††††† Higher of £300 and††† £300†† tax-
†††††††††††††††††† 5% of tax owing.††††††††††††††† related
So an electronic return filed on 31 August showing £7,000 owing attracts a penalty of £1,350.†† Ouch!
Is this something you need to worry about?
Well, if you are one of those people who leave it until the last minute you need to check your accountant is in good health and hasnít booked a holiday for January.† You should also tell him you will happily pay double time.
Our Advice:† Better get that 2010/11 return done now.
If you are a paper filer you are already too late.† You should have filed by 31 October.
TOO GOOD TO BE TRUE?
Consider this investment.
For every £1 you invest you receive a tax refund of 30p.
If the investment increases in value you pay no capital gains tax when you sell.
If you hold the investment until you die your estate pays no inheritance tax on its value.
The investment we are concerned with here is an investment in the shares of a qualifying unquoted company under the Enterprise Investment Scheme (EIS).
Too good to be true?
Well the tax breaks are real enough.† The government is keen to get individuals investing in small companies and has offered these incentives to prime the pump.
One big downside is that you are making an investment in shares for which there is no ready market.† If you decide you want to sell, the chances are you will have to find a buyer yourself.
Another downside is that smaller companies are perceived to be more risky than larger ones.† For example, large companies have to undergo audits and tend to produce more reliable and more frequent information.†† As more is known about them it is easier to put a fair value on their shares.
The downsides can be lessened to some extent by investing through an EIS scheme promoter.† Investments offered by promoters often have as a feature an informal arrangement to enable investors to sell out after a fixed period of time.
Our Advice: †We cannot advise on investments.† In terms of tax alone, however, these are excellent investments.†† Watch out for promoted schemes in the press in the period between now and 5 April.
A small local convenience store is trashed in the riots.† Some customers rally round and make voluntary donations to the shopkeeper.
Are these donations taxable as part of the shopkeeperís income or are they tax free?
Sadly, the answer is they are taxable because the money accrues to the shopkeeper as a profit of his trade.
There is precedent for this decision.† In the 1970ís the Falkirk Ice Rink was in financial difficulties.† One of the clubs which used the ice rink, anxious to ensure the continuation of the facilities for its members, made a voluntary donation.† The receipt was held to be taxable.
Sometimes tax just isnít fair.
WHAT IS WORSE THAN HAVING TO REPAY A LOAN?
Answer: having to repay a loan twice.
Surely that would never happen?
Well actually it could.
Students emerge into the world of work burdened with five figure loans.† When they earn over £15,000 they start to repay the loans.† The system is unwieldy.† It involves the employer deducting the loan repayments from salary and paying the money over to HMRC along with other payroll deductions like PAYE.† At the end of the tax year the employer sends HMRC an annual return showing how much has been deducted from each employee.† It is only at this stage that HMRC informs the Student Loan Company what repayments have been made.† The SLC adjusts the loan accordingly.
The problem comes when an employer goes bust during the year.† Such an employer isnít going to file an annual return with HMRC.† HMRC therefore does not know what loan repayment deductions have been made by the former employer and so the SLC cannot adjust the loan.
And the student might not realise there is a problem until the next time the SLC sends him or her a statement.
HMRC recognises there is a problem here.† Its advice to students is to keep salary payslips in a safe place.† They will be accepted as evidence of loan repayment in the absence of an employer return.
But if good evidence of deduction cannot be shown our young student is going to have to pay those missing repayments again.
JUST LET GO
Stan, the football club chairman, was the worst delegator in the world.† †He would never let go.†
This drove his staff mad so they bought him a Blackberry and told him to go on leave and if anything important cropped up they promised they would contact him.
So Stan went home, discussed this with his long suffering wife and children and eventually decided to book a two week holiday in a camper van in Devon.
Stan and his family set off and arrived at the camp site. The first weekend passed uneventfully and everybody had a wonderful, relaxing time. However, on Monday morning Stan noticed he had received an e mail from his assistant, Wendy.
He opened it up and it said "we are sorry to tell you that your cat has died".
Stan was distraught.† He rang Wendy to get the full story.† Having listened to her account he said "I come away on holiday and the first message I get is this one telling me that my poor cat has died. Surely you could have sent me a message telling me that my cat was in a tree, then the next day you could have sent me a further message informing me that the cat had fallen out of the tree and had to be taken to the vet and then by the third day I would have been better prepared to receive the bad news."
Wendy apologised and said she understood his concerns.
The following week was very enjoyable and relaxing and Stan began to really enjoy the holiday experience.
However, on the second Monday of his holiday he noticed that he had received another e mail from his assistant.
He opened it up and it said - "Stan, your grandmother is up a tree ...."
Thanks to Keith H for that.
Keep them coming.
Copyright:† K P Bonney & Co LLP 2011.† 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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