MIACCOUNTANT Professional Accountancy Services for your business
MIACCOUNTANT     Professional Accountancy Services for your business

We keep you updated

We provide our clients with regular updates on changes in taxation regulation, news from the world of accounting and, of course, information about the latest developments at MIACCOUNTANT.

New accounting rules - tax effects

HMRC has published 80 pages of reports on the tax implications of the FRS.

New standards. International accounting organisations have been developing ways to standardise accounts so that there is consistency in the way profits and losses are worked out. The result is new financial reporting standards (FRS), which will apply for accounting periods starting on or after 1 January 2015. However, they don’t apply to all companies.

More standards. If your company is small or medium sized (broadly, annual turnover of up to £6.5 million and net assets of no more than £3.26 million), a less strict set of accounting rules known as FRSSE can be used. This too has been updated and the changes will take effect at the same time as the new FRS.

In practice, you shouldn’t need to alter the way you keep your company’s records whichever accounting standard you use. In preparing your annual accounts your accountant will make any adjustments needed to reflect the changes.

What about tax? Given that HMRC has gone to great lengths to comment on the new standards, the question on your mind is probably will your company’s tax bill increase? In most cases the answer is “no”. Some changes will affect both accounting and taxable profit, such as that for deferring costs relating to carried over staff holidays, but this will only have a minor impact.

Personal Tax Return Deadlines and Penalties

 

Penalties for missing the tax return deadline

Length of delay

Penalty you will have to pay

1 day late

A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.

3 months late

£10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.

6 months late

£300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.

12 months late

£300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead. In some cases the penalties can be even higher than this.
These are as well as the penalties above.

Example

Mrs A's tax return is due on 31 January 2014 but HMRC doesn't receive it until 5 August 2014.

It is over 6 months late so she will have to pay all of the following:

  • £100 fixed penalty

  • £900 penalty - this is £10 each day from 1 May to 29 July, when the maximum 90 day penalty is reached.

  • £300 or 5% of the tax due - whichever is the higher

  

Penalties for paying late

Length of delay

Penalty you will have to pay

30 days late

5% of the tax you owe at that date

6 months late

5% of the tax you owe at that date. This is as well as the 5% above.

12 months late

5% of the tax unpaid at that date. This as well as the two 5% penalties above

 

The penalties above do not apply to any payments on account that you pay late.

 Example

 Mr T's tax for the 2012-13 tax year is due on 31 January 2014. HMRC doesn't receive it until 5 Aug 2014.

 It is over 6 months late so he will have to pay all of the following: 

  • 5% of the tax unpaid at 2 March (30 days after the date the tax was due)

  • 5%of the tax unpaid at 2 August (5 months after the first penalty)

  • interest on all outstanding amounts, including any unpaid penalties

     

Cash Basis for small business owners

To simplify accounting and tax reporting for the smallest businesses, from 6 April 2013 small businesses can choose to calculate profits/losses on the basis of the cash received and expenses paid out. This is known as the cash basis, and it ignores debts owed by the business and amounts owing to the business, until those amounts are paid. The normal accounting method is known as the accruals basis.
The cash basis will only be available to businesses which operate as sole-traders or partnerships, and whose turnover is under the VAT registration threshold (£79,000 from 1 April 2013). Some other businesses will be barred from using the cash basis and these include:

- All companies and LLPs;
- Farmers using the herd basis;
- Any business using profit averaging over several tax years;
- Businesses in a mineral extraction trade; and
- Lloyd's underwriters.

Once a business is using the cash basis it can carry on doing so until its annual turnover is twice the VAT registration threshold (£158,000 from April 2013).

Although apparently simple, the cash basis will have some disadvantages:

- The deduction for loan interest paid will be limited to £500 per year; and
- Losses can only be carried forward to set against future profits, whereas under the accruals basis losses can be carried back in the first four years of the trade and set off against the trader's other income.

In addition any unincorporated business, whether or not they are using the cash basis, will be able to use flat rate expenses to replace the calculation of actual costs incurred in these categories of expenses from 6 April 2013:

- Motoring costs (mileage at 45p per mile);
- Use of home for business purposes (based on number of hours used per month); and
- Private use of part of commercial premises, such as a public house (based on number of occupants who are business owners or their immediate family)

As these flat rates are completely optional, and will vary in effect in each business, we need to discuss if the flat rates will be suitable.

New National Minimum Wage Rates

 

Employment Tribunal Fees

A new system of fees for workers taking a claim to an  employment tribunal has now been implemented.

Historically, there has been no charge for someone wishing  to bring an employment tribunal claim against their employer or former  employer.

But from 29 July 2013, a fee will now be payable, which will  vary depending on whether the claim is  a Type A claim (a straightforward claim, e.g. for unpaid wages or refusal of  time off) or Type B (a more complex claim, for example for unfair dismissal or  discrimination).

A fee of £160 is payable to issue a Type A claim and this  rises to £250 for Type B claims.

If the case progresses to a hearing, a further fee of £230  must be paid for Type A claims and £950 for Type B claims. If a claim contains  both a Type A and Type B complaint, one fee will be charged at the Type B rate.

The fees have been introduced with the aim of transferring  some of the annual £74.4 million cost of running the employment tribunal system  from taxpayers to the people who use the system.

Early  conciliation, a new service from employment relationship experts Acas starting  next year, will mean that anybody who wants to lodge an employment tribunal  claim will have to notify Acas first and will then have an additional month to  attempt to resolve the dispute.

The  service will be based on a similar voluntary Acas service called  Pre Claim Conciliation (PCC). A new evaluation of PCC released by Acas on 17  July showed the service is achieving positive results, including:

  • nearly       nine out of ten employers who used PCC said that they would use it again
  • two       thirds of employees would advise a friend or relative to use PCC if they       were involved in a similar dispute
  • people       using the service said PCC was cheaper, easier or more convenient, less       traumatic or stressful and resolved their issue more quickly than       submitting an employment tribunal claim.

Also coming into force on 29 July were new rules that enable  an employer and employee to confidentially discuss terminating their employment  relationship, with evidence relating to these discussions inadmissible in any  subsequent ordinary unfair dismissal claim.

Self-employed NIC penalties

From 6 April 2009 there is a change in the penalty to pay for late notification to the HMRC that you have commenced self-employment.

Up to 6 April 2009 the penalty was £100 and you had 3 months after commencement of trade to let HMRC know.

From 6 April 2009 the rules have been changed as follows:

  1. Anyone who ceases or becomes liable for Class 2 or Class 3 contributions must notify HMRC immediately.
  2. A penalty may be levied (between 30% and 100% of the "lost contributions") if notice is not given by 31 January following the end of the tax year in which you become liable.
  3. There will be no penalty if you have a reasonable excuse for the late notification.

You may find out about other changes in a consultation at our office.

Your business is our business

Making an appointment

If you have any queries or wish to make an appointment please contact us:

 

Tel: 020 8804 0884

Email: info@miaccountant.co.uk

 

Alternatively, please use our contact form.

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