For once, a decent accountant’s joke

I’m not a great fan of accountants’ jokes, mainly because most accountants don’t have a sense of humour!

This joke was sent to me by a solicitor client which may explain why it stands above the others.

At the end of the tax year, HMRC sent a tax inspector to check the books of a local hospital.
While the taxman was checking the books, he turned to the executive of the hospital and said: “I notice you buy a lot of bandages. I imagine there’s a lot of wastage there. What do you do with the end of the roll when there’s too little left to be of any use?”
“Good question,” noted the executive. “We save them up and send them back to the bandage company and every once in a while, they send us a free roll.”
“Oh,” replied the taxman, somewhat disappointed that his unusual question had a practical answer. However, he was now well mounted on his favourite hobby horse and ready to be critical.“What about all these plaster purchases? What do you do with what’s left over after setting a cast on a patient?”
“Ah, yes,” replied the executive, who actually hadn’t a clue, but rising to the challenge said “We save that too, and send it back to the manufacturer and every so often they send us a free bag of plaster.”
“My, my, an answer for everything!” responded the inspector, who also fancied himself a bit of a wit. “What do you do with all the remains from the circumcision surgeries?”
“Here, too, we do not waste,” answered the executive. “What we do is save all the little foreskins and send them to the tax office, and about once a year they send us a complete pr**k.”

Top 10 tax credits renewal ‘excuses’ revealed

With the tax credits renewal deadline of 31 July just over two weeks away, HMRC has revealed the top 10 excuses for not renewing tax credits claims.

Excuses given by claimants to HM Revenue and Customs (HMRC) for missing the deadline include:

  • I didn’t need the money because I’d met a rich bloke, but he dumped me
  • My mum usually does this for me
  • The form was locked in the boot of my car, and then my car caught fire
  • My baby used the paperwork as a colouring book
  • My dog ate the form
  • I got confused with the 31 January Self Assessment deadline
  • I booked the last two weeks of July for a holiday and forgot all about it
  • I’ve been in hospital but am feeling much better now
  • I was unable to get income details from my employers in time
  • I thought I’d already renewed

Claimants have until the 31 July deadline to renew, or their payments might end. Last year more than 650,000 failed to renew on time.

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Details of how to apply are on our website.

Break clauses – what you need to know

I am indebted to Baines Wilson LLP for allowing me to publish this article which originally appeared in the Westmorland Gazette.

A tenant’s break clause in a commercial lease allows the tenant to terminate early. They are useful, and have been particularly helpful to tenants in the recession, but are also a legal minefield.

Break clauses invariably contain conditions, which typically include that the rent is paid up to date, that there has been no material breach of covenants and that vacant possession is given on the break date. Tenants must comply strictly with any conditions. If not, the break will not be validly exercised.

The lease will state how and when the break notice is to be served. All requirements must be strictly observed.

Diarise break clauses well in advance and take legal advice in good time. Compliance with conditions is not as straightforward as it might seem – in a recent case a tenant failed to exercise the break validly, only because it had not paid the interest due on some old rent arrears that had long since been paid off.

Failure to pay a few hundred pounds meant the tenant remained liable for the rent under the lease for the rest of the term, amounting to many thousands of pounds.

Landlords who receive a break notice from their tenant should not assume that the break has been validly exercised. Advice on the legal position and on the best tactical response to the notice could pay the dividends.

For further information contact Frances Richards on 01524 548494 or 01228 552600 or e-mail her at efr@baineswilson.co.uk

What the Budget means for small business finances

Economia, the magazine of the Institute of Chartered Accountants in England & Wales, very kindly published my summary of the Budget.

Unlike most of the summaries from other firms of chartered accountants it doesn’t focus on the detailed tweaks to the tax system which don’t really make a great deal of difference to businesses, especially small businesses. Instead, I have tried to point out what is important now that the Budget is over and what action you should take to make sure your business is a success.

 

Licensees – don’t lose out when summer starts

I hadn’t thought about this until I’d read it but some licensed premises may need to extend their hours to cope with the change to British Summertime on 30 March.

South Lakeland District Council (SLDC) have highlighted a problem on their website for pubs and clubs that normally open on a Saturday through to beyond 1am on a Sunday morning. SLDC are advising  any business which may be affected to apply for a temporary event notice (TEN).

Next week’s Budget – what to expect

 

This will be the last Budget which can have any significant impact on the May 2015 General Election.

The economy is finally beginning to grow but the Chancellor will be keen to say that there is still work to be done in addressing the public finances and rebalancing the economy.

So if you’re the owner of a small business what should you expect and more importantly what should you do?

  1. The Annual Investment Allowance was raised for a two year period from £25,000 to £250,000, and at the moment comes to an end on 31 December this year. If you’re thinking of spending money on equipment (including vans) during the coming year listen to what the Chancellor says about changing the Annual Investment Allowance. It may be worth bringing forward your spending plans.
  2. The Personal Allowance has increased enormously during this Parliament and it will be interesting to see what further announcements the Chancellor will make and whether there will be some announcement about the income level at which the 40% higher rate tax band begins. There is a great deal of correcting to be done! More and more people have been sucked into 40% tax because of ‘fiscal drag‘ and sadly there is very little that can be done about it. If you’re self employed, however, or own your own company you may be able to employ other ‘family members’ to utilise their basic rate (20%) bands to mitigate the effects.
  3. Business rates may change but until we have the details there is little which can be done.

Finally, and this relates to the 2013 Budget, make sure you take full advantage of the government’s Employment Allowance

 

Please may we have a bo***cks button for government statements?

A few months ago my daughter suggested that we needed a bo***cks button, in addition to the Like button, on Facebook to comment on our relative’s Facebook posts.

At about the same time, Paul Aplin, the chairman of the ICAEW Tax Faculty’s Technical Committee, in the Hardman Lecture asked why the ‘one-in,two-out‘ rule about red tape didn’t apply to tax law. Recently I  had to write to the Chief Executive of HMRC, so I took the opportunity to ask Paul’s question.

This is HMRC’s reply.

As you know in 2010, the Department  for Business  Innovation  and Skills launched  an
initiative to reduce the number  of new regulations  for businesses.  However,  tax law is not
included  in the ‘one-in, two-out’  rule because tax is not the same as regulation.  The
obligation  that tax law imposes  on business  represents  the essential  information  needed for
us to calculate  the tax charge,  or check compliance.  This distinguishes  them from pure
regulation,  where the aim is to change  behaviour.  The Government  initiatives to reduce red
tape are appropriate  for managing  regulatory  burdens  rather than tax policy.

Why did I bother?  And where’s the button?

Essential reading if you’re VAT registered – VAT Notes No. 1 of 2014

Yet another copy of VAT Notes has  been released by HMRC.

I have said previously that it isn’t the most exciting read you’ll come across but HMRC do expect you to read it (even though they don’t send you a copy any more!)

The full notes are here.

As a director in 2014/15, what should I pay myself?

The introduction of Employment Allowance and the increase in the personal allowance to £10,000 has muddied the waters yet more in deciding the optimum salary to take as a director.

Last year I said

Like so many tax issues, a simple question produces a complicated answer!

This year I’m going to keep it really simple – the optimum salary is £10,000 per annum (£833.33 per month). Any less and you will waste personal allowances, any more and you will start paying too much in National Insurance.

Please note that if the company doesn’t qualify for Employment Allowance or the Employment allowance can be utilised against other employees, £10,000 per annum is wrong.

Likewise, if you have other income (not dividends) to set against your personal allowance, then £10,000 is wrong.

P.S. The reasoning behind paying £10,000 even though it creates a personal NIC liability of £245 is as follows:

  • If you wanted to avoid NIC your annual salary would have to be less than £7,956
  • You would therefore ‘waste’ £2,044 of personal allowance (£10,000 – £7,956)
  • The company would have to pay £408.80 corporation tax on the ‘extra’ profit of £2,044.
  • Your (personal) NIC saving would be £245.28
  • Overall the company and you would be £163.52 ‘worse off’.
  • The company will have to pay £282 NIC on the ‘extra’ £2044 salary but this will be refunded under the Enterprise Allowance scheme.
  • Once your salary exceeds £10,000 you will start paying tax at 20% and NIC at 12% (the company will have to pay a further 13.8%*) compared to the company paying corporation tax at 20% on the ‘extra’ profit if you do nothing.

* 11.04% after tax relief

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