LAST CHANCE

Today's the last day for submitting your 2000/2001 Tax Return ie all income arising between 6 April 2000 and 5 April 2001. Any return filed after today will incur an automatic �100 fine.

It is also the day for paying any tax that is due as interest at 7% will start running from 1 February. Don't think of it as a cheap way of borrowing - if the tax remains unpaid for 28 days then a further 5% penalty is added and a further 5% in 6 months time.

THAT'S ENTERTAINMENT

Do you know that entertaining customers is not allowable for tax but that �75 per head on entertaining staff is deductible ?

The current tax-free limit is �75 per employee (VAT inclusive) for the whole tax year (April 6, 2001 to April 5, 2002), not for each event you hold by Extra Statutory Concession A7OB. So what happens if you do exceed the �75 limit? Any amount over the annual Limit of �75 per employee is taxable on the company and the employee:

What the TaxMan wants
Company. The excess is then treated like any other entertaining. So the expense will be added back onto your profits when it eventually comes to doing the company�s Corporation Tax (CT) calculation.
Employee. If they earn over �8,500 in a tax year (including the value of benefits-in-kind) then this excess has to go on the employee�s annual P11D return of benefits-in-kind. This means not only income tax (but not NI) for them but also employer�s NI at 11.9% for you.

In practice many companies spend more than �75 per head over the year, yet employees are not taxed on this.

A firm held an annual shindig for its customers, suppliers and staff. The whole event costs about �15,000. The first year they wrote to the Taxman and said: �We know the rules about disallowing entertainment but consider this event to be 50/50 with new business promotion. By way of proof here is a list of contracts that came out of the event.� The Taxman said �No� but they eventually settled on �5,000 out of the �15,000 as being disallowable. They have subsequently used this �5,000 figure each year since, regardless of the actual entertainment cost.

Events which are a mixture of staff and sales promotion can lead to confusion as to whether the �75 limit has been exceeded. This can work in your favour, so consider this for next year not just staff-only �dos�. It is worth noting that the �75 per head restriction applies per attendant at the event, not per employee attending. So spouses, partners or both could be used to bump up numbers. But if the �75 per head limit is breached, for them the full cost can be a taxable benefit, not just the excess over �75. What you disclose as staff entertaining is up to you, it is self-assessment after all. Running events which mix staff and business entertaining can help muddy the waters in your favour when looking at limits

WHEN CAN AN EMPLOYEE BE SELF EMPLOYED !

Professional fees.

A company engaged a consultant on various projects for a period of twelve months. The consultant�s invoices totalled �18,000. This was included in the company�s profit and loss account under the heading legal and professional (L&P).

Company�s problem

However, in this case the main danger was whether the consultant gained the right to be treated as an employee. If he did, the Taxman would insist that PAYE tax and NI should have been operated on the amount paid to the contractor

Not an employee.

The company should refuse to accept the Taxman�s argument. The consultant was self-employed, not an employee if :

1. He was not given the same rights as the company�s actual employees to holidays, etc.

2. There was no obligation for the company to find him work as each project finished or any obligation for the contractor to stay

3. The company split the consultant�s work down into as many distinct projects as possible. For each of them it was not actively supervising him as it would an employee.

4. The consultant�s invoices had varied each month to reflect the changes in project work and in fact there were eleven invoices not twelve, i.e. less than a year�s worth. And paid at irregular intervals

PERSONAL GUARANTEES

For many years it has been accepted that Banks have priority rights to debtor balances in the event of a company failure through the security of a �fixed charge� over debtors. A fixed charge on debtors means that the Bank is entitled to first call on debtor monies received by a liquidator or receiver in priority to the preferential creditors (the Crown departments and employees) or the ordinary unsecured creditors (suppliers).

On 5 June last year a New Zealand case, Brumark was decided by the Privy Council (comprising 5 English Law Lords) that challenges this view. Whilst the case is not binding in the UK it is possible that until an English case is decided little, if any, money will be paid to any non-clearing Bank under their fixed charge on debtors. It is the question of control exercisable by Banks over the proceeds of collection of debts that is at issue and whether not only the words of the security are sufficient but also that the arrangements referred to are operated in practice. The issue appears to be more of a risk to non-clearing Banks where control is less marked.

This presents some problems

� Will non-clearing Banks now start to rein in on current lending if their security position is less than they had thought?

� Directors of companies who have guarantees in place to the Bank may now be exposed to a greater risk than they believed when they signed the guarantee.

� Are the Banks now going to start shifting customers towards their factoring subsidiaries in order to protect themselves from exposure?

If you have given a personal guarantee to a non-clearing bank it will be worthwhile reconsidering your position.

FILING PENALTIES AT COMPANIES HOUSE

Do all companies who file their accounts late get penalised?

Yes, irrespective of their size, status or whether they are trading or not. This includes dormant, flat management and charitable companies.

Is the size of penalty the same for all companies?

No. There is one scale of penalties for private companies and another, higher scale for PLCs.

Will the Registrar accept any mitigating circumstances if the accounts are delivered late?

Yes. The Registrar has discretion not to collect a penalty, but exercises it in a company�s favour only in the most exceptional circumstances.

Will my company be penalised if the accounts are delayed in the post?

Yes. Accounts are only regarded as delivered when they arrive at Companies House.

Will the Registrar accept accounts which are faxed to him?

No. Accounts must contain original signatures.

What should I do if the filing deadline is close?

Use a guaranteed next day delivery service. Do not rely on first class post to deliver a letter the next day.

Do late filing penalties apply to any other documents?

No, only to accounts.

What should I do if I cannot meet the deadline?

Contact Companies House immediately and consider applying for an extension of filing time.

COMPANY CARS

Is there a tax efficient way of providing an employee with a company car ? Each case depends on individual circumstances as to cost of the car, its CO2 emissions and private and business mileage covered. However if an employee is prepared to make a contribution to the cost then it can be beneficial to both of you - call us for further details.

LOOKING TO ADVERTISE?

Sale time again. Naturally, you want to give yourself an edge over your competitors so are thinking about using some creative language. Everybody seems to use phrases such as, �biggest�, �best�, �cheapest�, etc. so what�s the harm? Or maybe you�re thinking about offering an additional incentive - a free gift or entry into a free draw. This sort of stuff is all fine - provided you comply with the British Codes of Advertising and Sales Promotion.

Strict rules. Your ads/promotional material certainly have to be legal, decent, honest and truthful. And when you mention availability of goods, etc. and other traders� prices you have to be very careful - the fines for getting it wrong can be enormous. So where to turn for help? The Committee of Advertising Practice (CAP) has recently launched a new online service - www.cap.org.uk It�s full of practical advice on what you can and cannot do - everything from distance selling to swearwords.

STARTING UP IN BUSINESS ?

The Paymaster General has launched a campaign to get people starting their own business to register immediately with Inland Revenue.
There is a guide available which aims to help you understand some of the many things you need to think about when you�re running a business, especially the main tax and National Insurance issues. It also highlights some other important areas of the law which aren�t the Inland Revenue�s responsibility - and suggests where to go for further, more detailed information.

PAYROLL

If you have employees and do not have time to produce the payroll yourself, our payroll service is ideal.

All you do is telephone or fax us with the pre-tax figures, we send you the payslips along with a summary showing how much needs to be paid to the Inland Revenue. When staff leave we create the P45s and at the end of the year we produce the relevant forms.

Our charges are very competitive and are dependant on the number of staff and the frequency of payment to them.

SERVICES FROM MILLS PYATT

Most people with small businesses spend more time bogged down in paperwork than actually doing what they are good at.

One of our aims is to reduce the burden by handling the mundane items like Payroll and VAT as well as the Year End Accounts and Tax.

Even with a Company Formation we fill in all the forms so that they just need to be signed.

TAX DEADLINES
Tax Year ended 5 April 2002

Tax Dates
Submit Tax Return 31-Jan-03
Pay Balance of 01/02 Tax 31-Jan-03
1st Payment on Account 02/03* 31-Jan-03
Last day of Tax Year 5-Apr-02
Payroll P14/P35 Forms Due 19-May-02
Employees PIIDs Due 6-Jul-02
Late Tax Return - 2nd Penalty 31-Jul-03
2nd Payment on Account 02/03* 31-Jul-03
Notify New Sources of Income 5-Oct-02

* No Payment on Account due if total tax and NI bill was under �500 in 2001/2002

TAX TIPS FOR EMPLOYEES

Check your tax code - Your standard tax code should be - 453L for 2001/2002. Your code would only usually be lower if your company provide you with any benefits (i.e. Car, Mobile Telephone, BUPA etc.) or higher if your are claiming the Children's Tax Credit (which is worth up to �442 in your pocket).


Keep all your tax related paperwork i.e. Change of tax code forms, End of Year P60 and P11D, and your P45 if you change Jobs (your new employer will need your P45 when you start a new job).

JANUARY TAX TIPS

Get your tax return in on time ie before 31 January - to avoid a �100 penalty.


Pay the tax on time (otherwise interest is due on late paid tax as well as a 5% surcharge).


Keep all your tax related records.


The Revenue only guarantee to calculate your tax if you get your return to them before 30th September. Otherwise you may need our to help you complete the calculations on your return. The revenue will help you calculate your tax 'correctly' but they do not usually help you to minimise your tax - Would you ask a crocodile to help you across a river.


The revenue have more power to start 'enquiries' and they do not have to give you a reason for looking in to your tax affairs.

VAT REGISTRATION

Registration for VAT is compulsory in certain situations, but also available on a voluntary basis subject to specific criteria. The rules for both are summarised below.

You MUST register for VAT when :

The value of your taxable supplies exceeds the registration threshold
If the value of your taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of �54,000, or the value of your taxable supplies in the next 30 days alone is expected to exceed this threshold, you should read the publication below and complete the application form.

VAT Notice 700/1 - Should I be registered for VAT?
Form VAT 1 - Application for VAT Registration (23.3 KB)

SAVE ENERGY - SAVE TAX

The Chancellor announced in Budget 2001 the introduction of a new scheme for 100% first year capital allowances (FYAs) for investments by businesses in designated energy-saving equipment. This scheme enables a business to write off immediately the whole of its capital spending on designated energy-saving plant and machinery against its taxable profits.