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A wealth of material was released following on from the Budget on 23 March 2011 but here are a few changes that you might not be aware of:
Spotlight on Plumbers
Plumbers, gas fitters and heating engineers who fail to declare their earnings are being targeted by the tax authorities.
Later this year, using information gained from various sources (including lists of members registered with certain plumbing federations, gas safe certifiers and other such institutions), HMRC will carry out targeted investigations aimed at those who have not disclosed their income.
The Revenue are encouraging these individuals to come forward now and register under the Plumbers Tax Safe Plan. Under the plan, plumbers, gas fitters, heating engineers and members of associated trades who have not notified HMRC of their income have until 31 May to tell the Revenue of their intention to disclose what they owe. Provided they then arrange for returns to be submitted and the relevant tax paid, their penalties will be limited to 20%.
Those who continue to evade tax will face substantially more significant penalties and possibly criminal prosecution.
In the past, HMRC have issued Extra Statutory Concessions (ESC) on a variety of tax issues. These ESC’s are now being phased out by either withdrawing the statement altogether or bringing it formally within the legislation.
Late Filing Concession
The previous 7 day grace period (under ESC B46), whereby HMRC would not seek to levy late filing penalties on company, employer or contractor end of year returns submitted within 7 days of their due dates, has been withdrawn with effect from 1 April 2011. An automatic penalty will now therefore be charged where the tax return is just 1 day late.
Informal Winding up of a Company
On cessation of business, in order to avoid high professional costs, many companies opt to apply to Companies House to have their company informally struck off the Register of Companies, rather than going through a formal liquidation process.
On the informal wind up of a company, under ESC C16, distributions issued on the striking off of a company were taxed as capital distributions (possibly attracting a tax rate of just 10%) rather than dividend distributions (which are often taxed at upwards of 25% for higher rate taxpayers). The concession is now to be formally legislated. However, as part of this process, it’s proposed that the distributions will only be taxed as capital if the total distributions are less than £4,000.
Distributions made under a formal liquidation process will still qualify for capital treatment.
Corporation Tax Returns and Payments
From 1 April 2011, all corporation tax liabilities must be settled electronically. You will no longer be able to post cheques to HMRC, although it will still be possible to pay at your bank or post office or through telephone or internet banking.
Also, all corporation tax returns must now be submitted electronically and in the correct “iXBRL” format (Word and Excel accounts will no longer be accepted).
Where tax returns are submitted without accounts in the correct iXBRL format, HMRC will reject the tax return as ‘incomplete’, which could give rise to late filing penalties and surcharges.
Springfords have already heavily invested in ensuring our accounts and tax software will be compliant with the new regulations. In the first year, some manual tagging of information will be required but every effort has been made to limit the effect of this on our clients and minimise any additional costs.
HMRC are also considering
Legislation that would remove the block on the recovery of VAT charged on business entertaining where the entertaining is provided to an overseas customer and is of a kind and on a scale reasonable to the circumstances.
If you would like any further advice on any of the above, or on any other tax matter, please contact Pamela Berry, firstname.lastname@example.org, or any member of the tax team at Springfords.