Losing the Benefit …

The changes in Child Benefit which have caused much debate over recent months, will come into effect next month.

As from 7^th January 2013, anyone with an annual income exceeding £50,000 or anyone who is the partner of someone with an income of over £50,000 will be affected by the changes.

For incomes above £60,000 per annum it will not be worth receiving child benefit as the tax charge on it will be the same as any benefit received. However a taxpayer can continue to receive it but will need to declare it on their self assessment tax return and pay the tax due on it.

For incomes between £50,000 and £60,000 the additional tax due will be on a sliding scale.

If you opt to stop receiving child benefit, an online form should be completed by the person who receives the benefit. However, a claim should always be made for child benefit on the birth of a child as this preserves the right of the claimant to state pension and some other benefits. It also ensures that the child receives their National Insurance Number at age 16.

Parents who have the ability to structure their own income levels (such as company directors and shareholders) should take tax planning advice if their income is around the £50,000 level. Equalisation of income in family companies, salary sacrifice schemes, and a review of pensions and investments may all be appropriate to consider.

Planning for 2013 and beyond...

The economic recession has changed the way in which business owners plan for the future.
Many have become reactive by planning for the things that are vital in the short term – such as tight control over cashflow, and cutting costs. This is, of course, inevitable and prudent during times of uncertainty, when the priority is to stay afloat, but it often means that longer term planning is overlooked.

That, in turn, can put the business in a weaker position when economic recovery arrives, as the business strategy may be unclear, and a lack of preparation can leave you lagging behind your competitors.

So, as well as short term financial forecasting, it is important to consider your longer term strategy. With a new year now not far around the corner, now is an ideal time to consider taking a few hours out of the day to day running of your business to formualte your strategic plans.
You may well have a “vision” in mind, of where you would like your business to be in the future - perhaps in terms of location, customer base, staff numbers or service-offering. You may have a desire to free up some of your own time, by developing others within your organisation, to take more responsibility.

However, have you worked out how to achieve those aspirations in practical terms, and set a time-based plan of the steps required ?

HJS run strategic planning workshops. If you would like more information please contact me on 02380 234 222.

When the taxman comes to call

We all know that times are tight, which means that HM Revenue & Customs (HMRC) is receiving lower tax income. Increasing tax revenue has now become high priority with HMRC and a wide number of measures are being used to achieve this.

The taxman wants to get his cheque quickly and a range of measures are now used to identify those who might be evading payment. The internet, third party information and scrutiny of local press reports are used to identify those who might be chancing their arm. Encouragement is given to report any suspicions of tax or benefit fraud online or by telephone.

There have been amnesties directed at particular professions - doctors, dentists, online traders, plumbers, electricians - to get them to come clean, and there have been more widely publicised campaigns for those with offshore income.

Certain trades are being targeted in the UK. Restaurants are particularly popular and a favourite ploy is to turn up at cashing up time and politely request to inspect the premises. Once they are in you cannot get them out!

Remember you don’t have to agree to an inspection unless HMRC holds tribunal approval. You can say it is not convenient and they are welcome to make an appointment to visit. Make sure your staff know this.

However, if you get that letter or visit, don’t bury your head in the sand and hope it will go away. It won’t. It is time to get professional advice and put things in order.

A kick start for bank lending with the new FLS

A new scheme designed to deliver cheap credit to banks in order to boost the economy was launched by the Government and the Bank of England on the 1^st August.

Under the Funding for Lending Scheme (FLS), banks and building societies will be able to borrow funds at cheaper rates than normal, and then lend this money to help businesses and individuals access more credit. Up to £80 billion will be available to institutions over the next 18 months, and the lenders will have to meet lending volume targets in order to take full advantage of the scheme.

Banks will be given the incentive that if they lend more, they will be able to borrow more from the FLS and at further lower cost. Because the Scheme gives lenders greater benefit the more they lend, it is hoped that some of this benefit will now filter through to the business community and to households.

Early indications are that the FLS has already prompted some mortgage lenders to offer cheaper rates on long-term loans.

It is anticipated that another recent Government initiative - the National Loan Guarantee Scheme (NLGS) – is likely to be phased over the coming months, as FLS becomes fully embedded. NLGS  was introduced in March but figures suggest it has failed to achieve the desired increase in lending to businesses.

As with other Government lending schemes, the FLS is available through the major High Street lenders. If you have any questions or would like help approaching a lender for business finance give us a call.

The morals of saving tax

There has been a lot of talk in the press recently about tax avoidance, following David Cameron denouncing comedian Jimmy Carr as morally questionable, due to his involvement with a scheme known as K2.  But is there any real problem with what Mr Carr was doing? Wouldn’t we all like to pay a little less tax, given half the chance?

The issue really is where do you draw the line ?  Once the press start looking at aggressive schemes like K2, the line between tax evasion and tax avoidance becomes blurred in the eyes of the general public.  That scheme, amongst others, has yet to be tested in court. However, such schemes do seek to legally  take advantage of loopholes in legislation, in order to save tax.  

It seems harsh to blame Jimmy Carr for a loss of morals in this country.  Someone advised him that he could save some money by investing his cash in a certain way, and he agreed to do so.  These schemes are fully disclosed to HM Revenue & Customs and are a far cry from the illegal activity of tax evasion.

Only people with considerable amounts of capital are likely to be involved in the most aggressive tax avoidance schemes. However, there are many ways in which the affairs of the average taxpayer can be arranged, in order to reduce their tax liability - without fear of having to make a public apology ! 

Examples include taking advantage of tax-efficient investments, looking at non-cash remuneration, topping up pensions, or making donations to charities.

We would be happy to advise you on a number of ways to be tax-efficient.   Just contact me to arrange an appointment.

Borrowing or not? 5 tips for your business

A recent survey carried out by the Federation of Small Business, indicates that the majority of business owners still hold the view that “the banks are not lending”.

Statistics from the survey showed that 41% of businesses which had applied for finance in the previous 3 months, had been turned down. Nearly 73% said that access to credit was “difficult” and only 1% rated credit availability as “very good”.

In contrast, local banks tell us they are very much open for business and have various case studies demonstrating businesses they have supported. In addition, the Bank of England and Treasury recently revealed emergency plans to pump further money into the economy – one of the main aims being to ensure that businesses can get the funding they need, in order to grow.

So, against that backdrop, how can your business maximise its chance of getting funding approved ?

1.       Do your preparation. Understand your cashflow and breakeven and be prepared to demonstrate that understanding.

2.       Keep good financial records, and plan ahead using budgets and forecasts.

3.       Put together a well thought-out business plan, based on realistic assumptions, demonstrating the ability to repay the borrowing.

4.      Have some contribution of your own to put into the transaction.

5.      Keep an open mind about the type of finance you need. A loan or overdraft is not always the only option - asset finance and invoice finance have their places too.

Meet the tax return deadline and avoid the penalties!

With the 31^st of January tax return deadline now only four weeks away, it is important to remember the penalties which could be imposed if your return is submitted late

Most of us know that there are financial penalties which HM Revenue & Customs (HMRC) can levy when a tax payment is late. However, many people pay less attention to the fact that penalties also apply if the tax return itself is received after the due date.

Since April 2011 the penalty structure which has been in place means a fine of £100 if the return is even just one day late, with the amount increasing daily from 1 May. If you don’t file the return until August, you will find yourself with a fixed penalty of £1,300. If your return is more than six months late, you could be fined a percentage of the tax bill as well.

What if you have no tax to pay?

Your tax return still needs to be submitted before the deadline even in cases where no tax will be payable, and failure to achieve this will still result in the penalties mentioned above.

What if you end up with a penalty?

Even if you find yourself in a situation where you have had a penalty imposed, it is still important to talk to a professional who fully understands the penalty rules, to ensure that you don’t pay any more than you have to.