HMRC strikes again…

It’s been widely reported that HMRC have sent out letters to around 1,000 high net worth individuals who have been identified as having a lower than average effective rate of tax in 2011/12.

Are they right?

In all likeliness, no!  HMRC have produced these letters by comparing the effective rate of tax paid by individuals, with a similar income level.  However it’s just not possible to take such a simple approach to the tax affairs of high net worth individuals.  There are numerous reasons why one individual’s tax liability may be much lower that another’s, such as loss relief claims, tax relief claimed on pension contributions or charitable donations, amongst others.

What’s the next step?

There is no doubt that receiving this letter will cause some individuals undue worry.  The wording of the letter is a little intimidating, with the last paragraph re-iterating the fact that there will be serious consequences for not paying the correct amount of tax.  However, it is important to bear in mind that this is not an investigation and receiving the letter does not mean that your tax return was wrong.

There is no obligation for the individual to reply to the letter but we would advise against ignoring the letter.  We can prepare a response to HMRC on your behalf, explaining the reasons why your effective rate is lower than expected, and this should bring the matter to a close.

Xero – online accounting on the go

At Clay Shaw Thomas we appreciate that doing your accounts can often feel like a chore but with Xero it needn’t be.

Our chosen online accounting software, Xero is safe and secure and allows you to update your accounts anywhere, anytime, helping you to take control of your finances. Xero allows you to access your financial information in real-time, making it much easier for you to share your data with us.

Benefits of Xero

Xero is a pay as you go service with no upfront charge, no installation, upgrades or maintenance costs. It provides your business with automated secure bank feeds, fast simple and customised invoicing, quick and easy VAT returns and most importantly real-time collaboration with us, your advisors. The Xero system allows us to review and analyse performance, help you increase profitability, plan tax and provide you with proactive and honest advice throughout your financial year.

Xero Touch is a mobile application. With bank reconciliations, invoicing, contacts and expense claims available on-the-go see how much can be achieved with just a few taps.

Xero on the go

For more information on how we can get you onto Xero please contact me

Less than a month to go…

It’s that time of year for forms P11D to be submitted to HM Revenue & Customs

What does this mean to you?

If you provide benefits to your employees, or reimburse expenses on behalf of your employees, you may be required to declare these on form P11D and submit them to HM Revenue & Customs.

Any benefit declared on the P11D is liable to Class 1A National Insurance, payable by the business, and included as taxable income of the employee.

What is considered to be a benefit?

If the business pays for anything on behalf of the employee, it may well be considered to be a benefit in kind.

The following list is not exhaustive but includes a few common examples which may need to be declared: –

  • Use of a company car and/or provision of fuel
  • Medical insurance
  • Dental insurance
  • Sports membership, e.g. gym or golf club
  • Loans to employees or directors in excess of £5,000
  • Provision of living accommodation
  • Gifts to employees
  • Provision of vouchers
  • Provision of childcare
  • Payment of school fees
  • Reimbursement of employee expenses

What are the implications?

The relevant paperwork needs to be submitted to HM Revenue & Customs by 6rd July 2014.  Failure to do so could result in penalties of £100 per month, or per part of a month, for each 50 employees.  The associated Class 1A National Insurance needs to be paid to HM Revenue & Customs by 19th July (22nd if electronically) otherwise late payment interest will be charged.

What to do next?

If you’re concerned that your business may provide benefits to your employees and/or directors please contact us.  The legislation surrounding Benefits in Kind can be complicated and we can help you decide whether this is a requirement for your business and the next best step for you to take.