"We strive to offer an exceptional level of customer service through our expertise and professionalism..."

We never forget that our business is about "people" - not "numbers". Our team talks "to" our clients rather than "at them" and we focus on developing our relationship with our clients by endeavouring to fully understand what they require from us.
HomeContact UsAbout UsServicesBusiness NewsClients NewsClient FocusNewslettersTestimonials

Newsletter February 2014

Welcome to this month's newsletter,

This month we have added articles covering: a situation where you might be advised to pay tax early; why you should prepare your business accounts as soon as you can; fuel for electric cars and the need for record keeping if you own property.

Our next newsletter will be published Thursday 6th March 2014.

Best to be informed

If you are self-employed, as a sole trader or in partnership, and if we assume that your business year end is 31 March, then the profits you earn in the year to 31 March 2014 will form the basis of your tax payments on account for the tax year 2014-15 (unless the year to 31 March 2014 was your final year of trading).

Problems may arise if profits, year on year, fluctuate significantly; either up or down.

Your tax payments as a self-employed person consist of two payments on account and a final settlement on the 31 January following the end of the relevant tax year. For example you will make equal payments on account for the tax year 2013-14 in January and in July 2014. If this is insufficient to cover the total tax and Class 4 NIC due then you will have a top up payment to make in 31 January 2015.

Payments on account are initially based on your Self Assessment liability for the previous tax year - in the above example, the January and July 2014 payments will be based on your actual taxes due for 2012-13.

If your trading profits have not increased or reduced significantly, the payments on account will usually cover tax due and there will be perhaps a small difference, under or overpaid, that will need to be sorted out in the following January.

However, if your profits have significantly increased or reduced, then cash flow considerations need to be taken into account.

If your profits for the year to 31 March 2014 are likely to be higher than the previous year:

In this case any payments on account you make January and July 2014 are unlikely to cover taxes due for 2013-14 and a balancing payment will arise on 31 January 2015.

If your profits for the year to 31 March 2014 are likely to be lower than the previous year:

In this case any payments on account you make in January and in July 2014 are likely to be more than you need to make to cover taxes due for 2013-14 and a balancing overpayment will arise on 31 January 2015. This can be addressed by making an election to reduce the payments on account to a more appropriate amount.

If either of these scenarios is likely to apply to your self-employed business profits, we advise you to have your accounts drawn up as soon as possible after your year end. The tax advantages can be summarised as:

  1. If your profits have been increasing, you will have the maximum period to create a cash reserve to cover any shortfall in taxes due on 31 January 2015.
  2. If your profits have been reducing, you can make an election to reduce the second payment on account for 2013-14, due on 31 July 2014.

Taxable benefits 2013-14

Where employees are provided with living accommodation, a car or a van, any private use is usually subject to specific scale charges or other rules. This article considers the provision of two further classes of assets provided for an employee's or director's personal use.

The cash equivalent of the asset provided is the annual value of the asset's use, plus expenses (other than costs of acquisition) incurred in connection with the asset that would not have been incurred without the provision of the benefit.

  1. Land: the annual value of the asset's use is the greater of the gross rateable value when the property was last rated, and any rent paid by the provider.
  2. Assets other than land: the annual value of the asset's use is equal to 20% of the asset's market value when it was first used to provide a benefit. If the provider paid rent for the asset that was more than the 20% calculation, then the higher figure is used.

Why should you elect to pay tax?

There is a situation where you might be advised to make an election to pay tax. It arises if you sell your company and accept payment in the form of shares (or certain types of loan notes) from the buying company.

Let's say that you own all of the shares in your company X Ltd and the original cost of the shares five years ago was £1,000.

You are approached by Z Ltd who offers to purchase your shares for £1m and offers you shares in Z Ltd as consideration for the transaction.

What are the tax consequences?

Basically, the share swap is not a chargeable event for Capital Gains Tax purposes. Your holding in Z Ltd will be deemed to have a base cost of £1,000 (the original cost of the X Ltd shares). This tax treatment is automatic. No election needs to be made. No tax is payable.

Why might you want to elect to pay tax now?

The issue that might encourage you to elect to pay Capital Gains Tax when the share swap is completed is Entrepreneurs' relief (ER). To qualify for ER certain criteria need to be met. For example:

  1. You will need to be a director or employee
  2. Hold at least 5% of the ordinary share capital and voting rights
  3. Have held the shares for at least a year, and
  4. The company must be a trading company or the holding company of a trading group

The possible benefit arises if you are uncertain that your new holding in Z ltd will qualify for ER when you dispose of the shares at some future date. Any gains that qualify for ER, either now or in the future, would be taxable at 10%; gains that do not qualify would be subject to tax at 28% (based on present rules).

In order to work out the best way forward you should consider your options before completing the sale.

Make sure your record keeping is up to scratch

In a recent tax tribunal case a tax payer was denied Capital Gains Tax relief for the cost of improvements to a property as he could provide no evidence of his expenditure to the court.

The court came to the conclusion that the taxpayer had made improvements and were somewhat dismayed by his inability to provide evidence.

This is a timely reminder that it is not only trading businesses that need to keep documentary evidence. Property owners should also ensure that they keep records of property purchases and sales together with copy invoices or other evidence of expenditure to improve their property.

Tax Diary February/March 2014

1 February 2014
Due date for Corporation Tax payable for the year ended 30 April 2013.

19 February 2014
PAYE and NIC deductions due for month ended 5 February 2014. (If you pay your tax electronically the due date is 22 February 2014.)

19 February 2014
Filing deadline for the CIS300 monthly return for the month ended 5 February 2014.

19 February 2014
CIS tax deducted for the month ended 5 February 2014 is payable by today.

1 March 2014
Self Assessment tax for 2012/13 paid after this date will incur a 5% surcharge.

1 March 2014
Due date for Corporation Tax due for the year ended 31 May 2013.

19 March 2014
PAYE and NIC deductions due for month ended 5 March 2014. (If you pay your tax electronically the due date is 22 March 2014.)

19 March 2014
Filing deadline for the CIS300 monthly return for the month ended 5 March 2014.

Rates & Allowances

Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax and the pension scheme earnings cap are set out below.

Alexander Probin
Suite 5
125/129 Witton Street
Northwich
Cheshire
CW9 5DY
t - 01606 359008
f - 01606 359009