Spreading The Tax Burden

In the Pre Budget Report delivered by the Chancellor Alistair Darling on 24 November 2008, he said “at this time of real difficulty for many small businesses, they need ‘time to pay’ when meeting their tax bills. I intend to meet this need”.

This means that HMRC must now enable firms facing difficulties to spread their tax on a timetable they can afford.

This will apply to all business taxes. VAT, corporation tax, income tax and national insurance. And not for just for three to six months but for as long as they need.”

So How Does This Affect Us?

This now means that many businesses, who are struggling financially, do not have to get into difficulties paying their tax or VAT liabilities.

If you are going to struggle with your cash flow and have some payments to make to HMRC then make use of this service – now.

They will not make any surcharges for late payment as they would normally do, but there will, of course, be an interest charge.

The Business Payment Support Service however only applies to amounts that are about to become due, or are just overdue. They cannot deal with outstanding overdue payments where HMRC have already contacted you about payment. There are separate provisions in place to deal with the longer term debts, but, again, these are considerably improved on the original arrangements.

More details are available at: http://www.hmrc.gov.uk/pbr2008/business-payment.htm

What Do I Do?

Call 0845 302 1435 and talk about your circumstances to one of the advisors. They promise to give you a decision in about 10 minutes for straight forward cases.

What Do I Need To Do To Prepare?

You do need to do a little homework first. They will need your tax reference number, details of the amounts that you will have trouble paying and, in their words, “basic details of your businesses income and outgoings”. This really means you need to have done at least a basic cash flow forecast.

Before you call, spend a bit of time forecasting your cash flow out as far as you need to, so you can see with a good margin how quickly you will be able to repay the amounts due. There is no point in agreeing a deal that you cannot achieve, so spend some time beforehand getting to grips with where you are.

The Business Payment Support Service do have a mandate to resolve all calls within 4 days, although their aim is to deal with them when you call and put in place a ‘time to pay’ deal. It is critical that you are prepared before you call as this will give you the best chance of getting a deal that works for you.

It's a Gift!

The tax man doesn't let us get away with much, even at Christmas time, but one question we get asked a lot, at this time of year, is; "What can we actually claim for our Christmas entertaining?"

Most of these business owners will be looking to extend the Christmas spirit to both their staff and customers alike, so, what can we actually get away with at this festive time?

Staff Entertaining

Where a client provides a Christmas party or other social or sporting event, for their employees, which is open to employees only, the expenditure will be allowable.

Employees, for this purpose, include partners of employees. But beware. Although the expenditure is allowable as a tax deduction, if the bill totals more than £150 per head then then employees may have to pay tax on the entertainment received as a benefit in kind.

Entertaining Customers / Business Gifts

Business entertaining, including that of customers is, generally speaking, diasallowable, and has been for many years, regardless of the purpose of that expenditure.

Business gifts are also not allowed as a deduction against profits – they are treated the same way as entertaining expenditure.

In some instances, what appears to be a gift may actually be a part of the costs of a sale to a customer. For instance a bunch of flowers presented to a customer who has just purchased a new car would effectively have been paid for by the customer – it’s part of the cost of the car.

But there is an exception for gifts that are presented which contain a conspicuous advertisement for the business.

Provided the cumulative value given to any one person does not exceed £50 in any one accounting period then such gifts will be allowable for tax purposes. This would cover promotional goods such as pens or key-rings emblazoned with your name or logo.

Companies House Increases Late Filing Penalties

Not to be outdone by HMRC, Companies House have decided to significantly increase the penalties levied for late filing of accounts.

Small limited companies are required to file a copy of their accounts each year with Companies House.

If you file even one day past the filing deadline you will be penalised.

The new late filing penalties which will be levied from 1 February 2009 are increasing dramatically!

The new fines for private companies are:

Not more than 1 month - £150 (presently £100).

More than 1 month but not more than 3 months - £375 (presently £100).

More than 3 months but not more than 6 months - £750 (presently £250).

More than 6 months - £1,500 (presently £500 between 6 to 12 months, £1,000 over one year).

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The new fines for public companies are:

Not more than 1 month - £750 (presently £500).

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More than 1 month but not more than 3 months - £1,500 (presently £500).

More than 3 months but not more than 6 months - £3,000 (presently £1,000).

More than 6 months - £7,500 (presently £2,000 between 6 to 12 months, £5,000 over one year).

Additionally if you were late filing in the previous year (and the previous financial year had begun on or after 6 April 2008) the above fines are doubled.

The new fines also apply to flat management and dormant companies.

The message is clear. If you are responsible for the management of a limited company make sure you give yourself plenty of time to prepare and file accounts on time.