Skip Navigation

Nicholas Ridge partner in Bryan and Ridge Chartered Accountants and Chartered Tax Adviser provides some personal New Year reflections:

NOW

Now, there’s a challenge I thought, to post a New Year’s article about filing Tax Returns on the website.

Hardly the most compelling subject in the world, especially at a time when people are hauling themselves back to work after some spectacular self indulgence and merry making.

On the other hand, the dreaded deadline is approaching and sometimes people do start off the new year with a renewed vigour and resolution about getting their affairs straight and keeping things that way.

Let me encourage that. It does no harm to embrace your legal obligations in a whole hearted kind of a way. After all, you are going to have to comply anyway, so might as well do it with a will.

Even if, reluctantly you come to the conclusion that it is too late now and there is no way your accounts are going to be filed on time, do not be put off. Just ask the accountant to get it done as speedily as possible and do not forget, if you pay all of the tax on time, ie by 31 January, there will be no fine for getting your Return in late.

How is that, you say? Well, it is sometimes not too difficult to make a punt at the sort of tax bill you are looking at, and then you can take the right amount of time putting the figures together properly afterwards.

Did you know that HMRC are precluded from enquiring into a Return that has been filed on time, unless they start their enquiry within one year? It is called the Enquiry Window and is one of the main benefits to the Taxpayer of the self-assessment regime. Filing late, extends the Enquiry Window to up to 15 months, and is therefore a Bad Thing.

Of course, the Enquiry Window does not protect you if you have not put HMRC fully in the picture about something you have done either by suppressing information or by giving false information.

In a later posting, I would like to tell you how HMRC have started to sabotage the right to certainty which the operation of the Enquiry Window bestows on the Taxpayer, and how harmful that will be for the system as a whole.

In the meantime, Happy New Year and Happy Filing!

11 January 2011:

Beware PAYE

There is a new penalty regime in place this year for late PAYE payments.

Never before attempted by HMRC, except in respect of payments due at the end of the tax year, late payments during the course of the tax year will now also lead to penalty action along the following lines:

No. of times payments are late in a tax year

Penalty percentage

Amount to which penalty percentages apply

1

No penalty (as long as the payment is less than six months late)

Total amount that is late in the tax year (ignoring the first late payment in that tax year)

2 – 4

1%

5 – 7

2%

8 – 10

3%

11 or more

4%

PAYE and National Insurance payments are due on 19th of each month following the month of payment. Experience to date already suggests that no days of grace are being permitted by the tax authorities and employers who have paid their PAYE late by just 1 or 2 days have received letters warning them that they may be liable to penalty action.

The penalties will be assessed after the end of the tax year when all of the necessary information has been sent in, and HMRC asserts that it has measures in place to catch out employers who deliberately underpay as the year goes by, paying more at the end to balance things out.

We expect the regime to catch lots of employers out, including many who act in utmost good faith and it is likely to prove a bothersome regime, adding nothing to the benefits of being an employer.

23 June 2010

Re-engineering the economy

Let’s face it. None of us wanted to be here, living in a bankrupt economy with things getting worse and no-one in charge.

That is what happens though when your country lives for decades beyond its means and gets used to it. The astonishing thing is, that it took the rest of the world so long to sit up and take notice.

Nevertheless, the situation provides a rare opportunity for reform. The government’s strategy for restructuring the economy has 3 main strands:

1. Shifting resources from the public to the private sector, ie cutting public expenditure
What an indictment of the system it is, that so many of the working population remain dependant on the government for paying their wages, and are scared because of it by the prospect of change.
In fact, the withdrawal of non-competitive government services from certain sectors may well provide a positive boost to the economy overall.
2. Equalising regional imbalances
Despite worthy sentiments about upholding public sector investment in the regions, there are powerful vested interests in London and the South East which will want to retain their more-than fair share of the national resource. I vote to move parliament to Nottingham. It is a nice place, land values are cheap and it is in the centre of the country. The move would send out a strong signal about shifting power including economic power away from London & the South East for good.
The NI holiday which has been announced for new businesses set up in the regions will be of limited application. Many new small businesses do not, in my experience, take on much staff until the end of the first year, or until years 2 or 3, by which time the opportunity for the NI holiday will have largely expired.
3. Helping the lower paid
Raising the tax threshold to £7475 will I believe have an un-looked for liberating impact on lower paid people, but the government should go further, quicker. A tax threshold of £10000, or above, will encourage work and discourage dependancy on benefits in a way which would be important structurally. Savings to the public purse would extend beyond the need for far fewer benefits and PAYE staff, into big savings on IT budgets and infrastructure. Unimaginable!

It is an exciting moment for the country’s economy. My prediction for 2015 is that, as a result of this Budget, more of us will feel better off than we do now, than will feel worse off.

Turning to the tax measures involved, for small businesses there remains much scope for tax planning involving company structures.

In detail, corporation tax rates are due to fall from 28% to 24% over the next 4 years and from 21% to 20% from next year for so-called small companies. These reductions are due to be compensated for by reductions in the tax allowances for capital expenditure, although for technical reasons to do with the Annual Investment Allowance, again there will be little adverse impact for the smaller businesses.

The increased personal tax allowance threshold next year, will be matched by an increase in the level at which an employer can pay someone before having to start paying NI. Thus, from April 2011, Employer’s NI will not start unless earnings reach at least £7475 - the precise level will not be know until the Autumn.

In other respects, the NI increases announced last year will continue to have effect from next April.

A NI holiday has been announced for businesses setting up in the regions, i.e. outside of London, the South East and the prosperous East. The holiday may turn out to be of limited value and is commented on above.

Capital gains tax has risen sharply, for non-business assets, from 23 June 2010, to 28%. Some modest gains will continue to be taxed at 18%, provided that, together with the individual’s taxable income they are less than the higher rate band, currently £37400. The annual CGT exemption remains £10100 per individual.

The tax rate for capital gains of up to £5m on business assets is 10%.

Getting the distinction right between business and non-business assets will be even more important than before for capital gains tax.

The standard rate of VAT will increase to 20% on 4 January 2011. There are however no changes in VAT zero rate and exempt groups.

Two other things to mention, for the sake of completeness. 1); banking levy for banks, 2); reinstatement of holiday lettings regime and reliefs.

Conclusion

Forget the tax commentary; forget the economic analysis. The most important achievement of this Budget may be that of restoring public trust in a process which had come to be seen as an abuse by those at whom it was directed. Without getting carried away, let us at least give the Chancellor the benefit of the doubt for the moment.