Save tax with our pre 6 April 2010 tax planning ideas
Whilst the country is officially out of recession, many individuals and businesses are still feeling the effects of the 18 month downturn. With the 31 January filing deadline passed, now is the ideal time to review your tax position to ensure you are paying no more tax than you need to.
These ideas are not exhaustive and are not covered in detail. To discuss your specific circumstances please contact your usual Hazlewoods contact or e-mail firstname.lastname@example.org.
Pay tax and file returns on time to avoid penalties, surcharges and interest
It sounds simple, but by making sure you file your tax and VAT returns on time you can avoid the various penalties, surcharges and interest which HM Revenue & Customs (HMRC) can otherwise charge.
From the tax year 2010–11 HMRC are introducing penalties for all employers and contractors who do not pay PAYE on time. This means it will affect in-year payments due from May 2010 onwards and class 1A NICs payments due in July 2011. It is worth checking now that you have systems in place to ensure payment is made on time.
Time To Pay (TTP)
If you know you are not going to be able to pay your tax by the due date you can use HMRC’s Business Payment Support Service (BPSS) to enter into a TTP arrangement. By doing this you will help your cash flow position and if you do it early enough you will also avoid late payment surcharges, although interest will still be charged.
Before telephoning the BPSS it is important to consider the likely questions that will be asked. Although this will take time, it is worth it, as the benefits of a TTP agreement can be vital.
In particular HMRCs questions are likely to focus on:
- Whether the business has a strategy to ensure it remains viable, such as reducing its cost base.
- Whether the owners are able to offer personal financial support such as making a capital payment to the business or offering personal guarantees to secure a bank loan.
- Whether the business is able to get other forms of finance, and what it has done to try to do this.
- Whether the business can pay a lump sum up front followed by regular repayments.
- What financial projections have been prepared, and if so are they sensible, and what picture do they paint?
If you are likely to have difficulties making your imminent tax payments please contact us. We can then prepare you for the questions that are likely to be asked, or deal with the whole application for you.
Whereas HMRC previously required evidence of the taxpayers inability to pay and that they had exhausted all other sources of finance, cases agreed by the BPSS and cases the BPSS refer to the local offices are in general now agreed with a short telephone conversation, as long as a reason can be given as to why the taxpayer needs time to pay.
VAT default surcharges will not be charged if the business contacts HMRC before the payment is due and agrees a TTP arrangement. Similarly, a surcharge can be avoided on late payment of income tax where a TTP agreement is entered into before the relevant surcharge date (28 February and 31 July). And in both cases the terms of the agreement must be adhered to.
As soon as you can, consider whether you will be able to make your imminent tax payments. If you are likely to have insufficient funds, contact Hazlewoods or HMRC direct to see if you can agree time to pay. As announced in the PBR businesses can call the BPSS on 0845 302 1435 for help.
Pay and file online to get extra time to pay
Filing returns and paying tax online will often give you a few additional days to make tax payments.
For example if you pay your VAT for the month ended 28 February electronically rather than having to pay by 31 March (as would be the case if you paid by cheque) you will have until 7 April to make the payment.
File returns early to get repayments
If your business has made a loss in the current year (2009/10), consider filing your return earlier than the statutory deadline of 31 January 2011, as this will generate a tax repayment as early as possible.
The time limits for assessments and claims is changing from 31 March for companies and 5 April for individuals.
• For direct taxes the five years and 10 month time limits (six years for companies) for taxpayer claims is down to four years.
• For VAT, the limit is increased from three to four years.
Abbey Tax Enquiry Insurance
For over seven years we have been offering clients insurance to protect against the costs of our fees in respect of HMRC enquiries. We offer this insurance, at a competitive price, to cover both aspect enquiries, where HMRC query just one or a few items on the return, and the more rigorous full enquiries. If you are not an existing member of the insurance scheme and would like more details or an application form please contact Margaret Wilkinson on 01242 680000 or e-mail: email@example.com.