Account Tax Ltd    
 

News

We will publish articles of interest here.  If you are a regular visitor to our site, we will also post any changes here first.

**NEW** - Double Taxation: Falkland Islands

The rate of income tax applied to contractors working in the Falklands is 21%.  This is being paid by the Operators on your behalf.  If you are being paid as an individual this is a straightforward offset against your UK tax liability.  For every £100 earned you have a £21 tax voucher such that your gross income for UK purposes is £121.  Once the UK tax on £121 is calculated you can offset the £21 credit leaving a small balance to pay in the UK.  This complies with the Double Taxation Agreement which states that is applies to the 'same income' (Article 24 of the DTA).  If you are using a limited company to invoice for your work then the position is much more complicated.  To utilise the Falklands tax credit you would need to force the same income by drawing a salary equal to your invoice value.  This would involve paying Employers NI and Employees NI which would cost the company more that the value of the contract.  The contacts for Falklands tax information are attached.  Stuart Brown is particularly helpful.

**NEW** - IR35 Latest   -  7th July 2010

In run up to the 22^nd June Budget the Coalition promised to look at IR35.  The notes then included a statement that IR35 would be reviewed in conjunction with a re-assessment of the taxation of small business.
Yesterday I had a meeting with the Status Inspector for Scotland East.  He told me that they were still opening IR35 cases and that it was ‘business as usual’.
Clients who took insurance to cover IR35 inspection costs might wish to continue.
Contact jennifer@accounttaxltd.com to arrange cover.

**NEW** - Mobile Phones - Jul 2010

Make absolutely sure that the mobile phones used in your business are contracted to the company.  Getting the company to pay the full cost of your personal mobile attracts a benefit-in-kind charge.  No benefit arises if the contract is in the company name – even if it is used for personal calls.

IR35 Demise - May 2010

On the 20th May the coalition Government declared that "it will review IR35 as part of a wholesale review of all small business taxation and seek to replace it with simpler measures that prevent tax avoidance but not place undue administrative burdens or uncertainty on the self employed or restrict labour market flexibility".  It is the 4th highest priority in improving the UK's ability to do business.  There are some key elements to this statement.  Supporting labour market flexibility is positive.  Contractors constitute flexibility.  Clearly the Government is going to support the contract market.  To add substance to this they have stated that they expect 30% of all Government contracts to be awarded to small business by the end of this parliament.  This is a 100 fold increase on the current level.  The other welcome term is the removal of uncertainty.  IR35 was a pernicious piece of legislation that created fear.  The negative aspect of their statement is the reference to tax avoidance.  Clearly it is fiscally advantageous to only have to pay 21% tax when people in salaried positions are having to pay 41% and 51% rates of tax and national insurance.  This gulf will have to narrow.

As the fear factor has been removed we will not, as a matter of course, offer everybody insurance for tax investigations this year.  If you still want to be covered, simply call or email us.   

IR35 Seminars CANCELLED DUE TO ABOVE - Mar 2010

We will be holding 8 seminars for our clients covering the latest information on IR35 and budget/tax updates in May and June at the Links Hotel, Montrose from 7pm to 8:30pm. 
The dates are as follows:

Tuesday 18th May            Wednesday 19th May
Wednesday 26th May      Thursday 27th May
Wednesday 2nd June      Thursday 3rd June
Tuesday 8th June              Wednesday 9th June

Please email us to let us know if you are coming and your preferred date.

2010/11 Tax Rates - Mar 2010

The personal allowance is unchanged at £6475.  The higher rate threshold is unmoved.
Tax traps however have been introduced higher up the income scale.  At £100,000 of personal income (including benefits) a marginal tax rate of 60% kicks in.  It works like this: for every £2 earned over this threshold £1 of personal allowance is withdrawn.  This costs 40p of extra tax on £2.  The £2 also attracts 40% tax - 80p.  That's £1.20 of tax on income of £2, ie 60% tax.
At an income of £112,950 the personal allowance has been eroded completely.  You then simply suffer 40% tax on income up to £150,000 at which point the rate increases to 50% on income in excess of this threshold.  So, its 20% tax up to £44,000 then 40% up to £100,000 followed by a hike to 60% then back to 40% before rising to 50% beyond £150,000.
This tale of tax woe particularly affects those working in Norway.  For those with an E101 (exemption from Norwegian NI) the top rate of tax is 40%.  As their incomes invariably exceed £100,000 they will have additional tax to pay.

Currency - Mar 2010

I return to the plight of the pound.  If you have earnings in foreign currencies (AUD, USD, Norwegian Krona, Euros) then open a business account in that currency.  Since i posted this suggestion the pound has dropped 10-25% in value.  The long term exchange rate of 12 to 1 with Norway is now just below 9 to 1.
A currency reflects the financial management of the country.  The UK is facing a national debt of £1.5 trillion.  The interest on this debt will be in the order of £600 billion.  That is probably equivalent to the NHS budget.  Worse than these stark figures is the realisation that the UK books don't tell the whole story.  The deficit on public sector pensions isn't provided for.  The state pension liability is nowhere to be seen.  The PFI commitments aren't on the UK balance sheet.  So, how bad is it?  To quote the currency commentators "in the first week of March 2010 the Zimbabwean dollar strengthened against sterling".

Non Residence - Mar 2010

The Gaines-Cooper ruling gives the Revenue a precedent to challenge all non-residents.  Precedent, however, dictates that each case is taken individually.  The Revenue don't have the resources to examine the circumstances of 6 million UK non-residents.
I would expect the Government to legislate for the Gaines-Cooper case to become law ie if you have family in the UK and/or have a property 'available for your use' then you will be resident irrespective of the number of days spent in the UK.  A property isn't 'available for your use' if it is rented out.

Non Resident Rules -  Feb 2010

Robert Gaines-Cooper lost his tax appeal last week and was deemed to be a UK resident despite having never spent more than 91 days in the UK since 1976.  He faces a tax bill of £30million.  The courts have deemed him to be UK resident because they are looking at residency more carefully and HMRC have stated that they will look at each case individually. 
HMRC's updated guidance reads "Just because you leave the UK to live or work abroad does not necessarily prove that you are no longer resident here if, for example, you keep connections in the UK such as property, economic interests, available accommodation and social activities or if you have children in education here".
To be perfectly safe you must sell up completely and not return to the UK at all in the first year to escape the HMRC tax net.  To be in the clear you should take your spouse and children with you, you should resign from all UK clubs and ensure that the electoral register is updated to enable you to vote from abroad.
Given the numbers who are non-resident and given that the Revenue must assess on a case by case basis, it will take some years for the impact of this to be fully felt.

More VAT Changes - Jan 2010

From April, VAT payments and returns will be done online for business who have net sales of £100,000 or more (VAT exclusive turnover).  Businesses and agents should register NOW.  To register you will need five facts that can be found on your last VAT return and VAT 4 certificate of registration.  These are:

For more info see here

VAT Changes - Jan 2010

The standard rate of VAT reverted back to 17.5% on the 1st January 2010.  The flat rates applicable have been altered in some cases.  The table of rates is available here.  The commonest categories that apply are:
Engineers and surveyors                            13%
Management consultancy                           12.1/2%

I would suggest that those who are predominantly office based should use 12.1/2% and those who are offshore should use 13%.  The 1% discount still applies for those in their first 12 months of VAT registration.

Thanks for supporting Montrose in the People's Millions - Dec 2009
We couldn't have done it without your votes.  We can now go ahead and install the floodlights thanks to the People's Millions grant award.

2006 Companies Act - Oct 2009

Changes to the Companies Act enacted in October 2009 will affect you. 

Earnings in Foreign Currency - Oct 2009

Currencies are volatile.  If you earn in a foreign currency you should make sure it is paid into a foreign currency account.  If the local bank say that you can't have a US$ or Euro account they are talking rubbish!
Once the funds are in a currency account, don't let the bank change them for you.  Use a specialist currency dealer such as HiFX or TorFX.  Today I changed an amount of Sterling into Canadian $ at 1.741.  RBS offered 1.62.  That's robbery!  I saved myself $4326 by using a specialist.  HiFX offer an online service.  The rate updates every 30 seconds.  Once you click on a rate you are committed.  If your invoices are being converted directly by the bank you are throwing money away.
 

HMRC Penalties - Sep 2009

Extra care and attention required with VAT to avoid these!

50% Tax Rate - Sep 2009

See how it may affect you here.

Non-Residence - Aug 2009

There isn't a statutory definition of non-residence.  The Revenue definition to date has been a single test of time.  Spend no more than 91 midnights in the UK in a tax year and you are non-resident.  For a long term absence of 4 years or more this definition is relaxed to allow a maximum of 182 midnights in any one year provided the accumulating average does not exceed 90 midnights per annum.  This definition is concise.  The Revenue have caused concern recently by adding subjective tests to this chronological certainty.  They have won 2 high profile cases where they sought to establish that the tax payers 'belonged' to the UK.  Belonging was defined as having a wife and family resident in the UK and owning a family home that was available for use.  Because this enhanced definition emanates from case law the Revenue have to look at each case on its merits.  They don't have the resources to do this.

What the November 2008 Budget means for you

Click here for a summary of how the budget will affect you and your business.

Working in Norway

Account Tax Ltd have established a reporting structure to enable day raters to comply with Norwegian tax legislation.  We perform this service for a number of clients and are particularly pleased to be associated with AGR Peak in Stavanger.  This text covers what we do.  On the contractors part all we need is copies of your monthly invoices.

VAT position when working overseas - June 2008

In May HMRC issued a new guidance note on the subject : Place of Supply of Services

In the past you would charge VAT if you used a UK Agent and worked overseas.  Now VAT should not be charged on work that is physically executed overseas. 
We have received confirmation from HMRC that overseas work should be regarded as outside the scope of VAT and shouldn't be included in Flat Rate Scheme calculations.  If you need more detail or clarification, contact Bronwyn Stewart on 01674 675028.

VAT Flat Rate Scheme - April 2008

It has come to our attention that a firm, which specialises in dealing with one man limited companies, charges a fee for processing the flat rate VAT returns.  A flat rate VAT return involves adding the value of your invoices (including VAT) in a quarter, and applying the VAT percentage (which is commonly 11.5% or 12.5%).  This takes less than 10 minutes and this is why we don't charge to process flat rate VAT returns.  It also helps us when preparing the year end accounts because we know the VAT has been reconciled.

How much would the 'specialists' charge for this service?  Over £800 for someone with a VAT profit of £3500!!!  As we don't charge for this service, you would automatically have an £800 saving!

If you want to move to us, download this document, personalise it and send it to your provider.  We will deal with the rest.  The transition should be seamless.

Qualified Accountants - April 2008

The designation 'Accountant' isn't protected in the UK.  Anybody can call themselves an Accountant, and many do.  Because there is a shortage of Accountants in the North East of Scotland there is a proliferation of accounting and taxation services from companies that aren't qualified and thereby subject to monitoring.  Make sure that the firms you trust are properly designated Accountants.  Watch out for the following sorts of designation; Chartered Accountants, Chartered Certified Accountants, Registered Auditors, Chartered Tax Advisers.  If these labels aren't on their letterheads then beware.  Ask the question.  In my experience qualified firms don't charge any more than unqualifieds.
In Account Tax Ltd, our qualified Accountants have served their time in professional firms.  After graduating, I completed my apprenticeship with KPMG in Glasgow.  Thereafter I moved to Tenneco Inc in Leiden before joining Shell Expro.  When I left Shell to set up my own tax practice in 1985, I was Head of Taxation covering Corporation Tax, Petroleum Revenue Tax and Royalty.
The CCAB (Consultative Body for Qualified Accountants) is currently lobbying government to protect the term 'Accountant'.  This will probably take years to come into effect so, in the meantime, ensure you are properly represented.

Non Doms Update - April 2008

John McFall, the Treasury Committee Chairman, has just found out what we already knew.  Just how bad must the quality of Civil Servants in the Treasury be if little me can anticipate outcomes they cannot...

Extract from Accountancy Age (10 Apr 08)

TREASURY HAS IGNORED LOW INCOME NON DOMS
The government has ignore the impact of its new non-dom policy on low and mid-income workers, the Treasury committee said in its report on the Budget.  Committee Chairman John McFall said the government has placed 'too much focus on the very wealthy non-doms'.  The failure to consider the impact on these groups could place a substantial administrative and enforcement burden on HM Revenue & Customs.

Income Shifting - April 2008

Click here for a presentation given recently on Income Shifting

Non Residence and Non-Dom Updates - Dec 07

Click for the latest on Non Residence and Non-Doms

October Budget Update

The October budget update contained proposals which will have an impact when they become law in April 2008.  They are as follows:

The change in the non-resident rules is a simple one but has a big impact.  At present days of departure from the UK and subsequent return count as 'overseas days'.  From April 6th they will count as 'UK days'.  Rotational workers will therefore lose at least 12 days p.a. by this altered ruling.

The current system of Capital Gains distinguishes between Investment Assets (buy to let residential properties, shares in Tesco) and Business Assets (commercial property and shares in your own company).  The system also recognises 'time'.  The longer you hold an asset the less tax you pay.  For business assets held for 2 years or more the rate of CGT on the profit on disposal is 10%.  Investment asset gains are taxed at 40%, unless you hold the asset for 10 years, whereby the tax charge reduces in steps to 25%.
From 6th April 2008 the distinction between the asset types and recognition of time/inflation are removed.  A flat rate CGT of 18% applies on the profit.
Shop owners, farmers, publicans etc should consider selling up before 6th April because the tax take will increase by 80%.  Many one man limited companies used to effect a capital gain by closing down and distributing the business asset (cash) as capital rather than dividends.  This opportunity will be considerably less attractive from April.

Small companies are also at threat from the proposed new rules on sharing income with spouses/partners.  These proposals have to be legislated for but will be as subjective as IR35.  They can only be judged on a case by case basis.

The Government are desperate for additional tax revenues to fund the ever spiraling debt they have committed us to.  You are being targeted.

Double Taxation Relief for Russian Republic Workers

We can help you to claim double taxation relief for Azeri and Kazakh tax.  Please see the attached flyer for further information.

IR35 News

Non-Residence News

The latest attack from the powers that be comes on those who register as non-resident.  See here for more details.

Overseas Working  News

The biggest problem attaching to overseas assignments is that virtually every foreign regime deducts tax.   These taxes are invariably settled by the client (eg BP, Shell, etc).   The foreign tax authorities can’t organise the pursuit of every individual consultant and so pursue the easy target.   The good news for the consultants is that their foreign tax gets paid on their behalf (usually between 25% and 35% of their gross income).   The bad news is that it is personal tax rather than corporate tax.  
The outcome is a mismatch between foreign tax credits and UK tax liabilities.   One of the solutions would be to take a UK salary of almost the entire fee income (in the style of IR35).   The disadvantage is that both employers and employees NI would still be payable.  

If you would like to know more about this or see worked examples, please contact me.

S660A News

No longer applicable as the Govt lost the Arctic Systems case in the Court of Appeal.  Having done so, it took them all of 6 hours to change the law which will be introduced from the 6th April 2008.  The expectation is that spouse dividends will be measured according to contribution to the business.

We have moved! 

You will now find us at:

1st Floor Inchbraoch House,
South Quay, Ferryden
Montrose, DD10 9SL

Our telephone and fax number remain the same.

From the North, follow the A92 through Montrose and over the bridge onto Rossie Island.  At the next roundabout, take the first exit and head through to the Port Authority barrier.  At the barrier, identify yourself and whom you are visiting and await instructions from Security.  Once you reach Inchbraoch House, enter through the West end entrance.  Our office can be found on the first floor.

Send mail to simone@worksmarter.ltd.uk with questions or comments about this web site.
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Last modified: 11/05/09