Newsletter September 2008
As we near the end of the summer season, or is it the monsoon season, we are including information in the newsletter this month to highlight:
- Changes to PAYE tax codes 7th September 2008
- State Benefits that are tax free
- Two important consequences of the new Annual Investment Allowance, and
- Postal and payment changes.
Our October newsletter will be published on 6 October 2008.
Changes to tax codes
or those who have not received the HM Revenue & Customs (HMRC) employers letter we have reproduced below changes to tax codes which need to be made from 7 September 2008.
The changes were introduced to soften the effects on some lower paid persons who were adversely affected by the scrapping of the 10% starting rate band for income tax on 6 April 2008. As well as changes to tax codes you should also have received new tax tables or changes to your payroll software that accommodate the lowering of the basic rate band for income tax purposes; from £36,000 to £34,800.
Changes to Tax Codes:
- L codes - Add 60 to the existing code. For example 543L becomes 603L.
- T codes - No change unless you receive P6 from tax office.
- P,V or Y codes - No change unless you receive P6 from tax office.
- A or H codes - These codes are no longer in use, seek advice from HMRC immediately if you are still using codes with these suffixes.
Running your company from home
If you run your business through a limited company and your base of operations is your home office, it is possible to charge your company rent. Of course if you do this the company will be able to deduct the rents from its profits and you will need to declare the rents on your self-assessment return. On the face of it there would seem to be no advantage.
But what if you also have buy to let properties and are making losses? Very often buy to let property owners have more costs (loan interest etc) than they have rents receivable. Unfortunately it is not possible to set off these rental losses against other income. The losses have to be carried forward to be set against rental profits in future years.
If on the other hand you do charge your company rents for the use of a Home Office it would be possible to set off any buy to let losses against this income. The rents from your company and your buy to let rents are taxable as property income. Effectively you would be getting tax relief through your company for the rental losses you personally suffer on your buy to let property. A number of considerations need to be taken into account:
- If you charge your company rents you must have a proper rental agreement between you and your company, otherwise the revenue could seek to treat the rental payments as part of your salary from the company.
- The rents that you charge for your home office must be charged on a commercial basis. It may be sensible to have a formal valuation undertaken.
- The rental agreement should state that the office space at home is only available for fixed periods each day. This is necessary to observe the non-exclusive principle. Without this you could jeopardise your principal private residence exemption for capital gains tax purposes.
- If you have a mortgage, you may need to check with your lender before entering into such an arrangement
VAT Voluntary registration charity shops
For VAT purposes income from sales in a charity shop are zero rated. if a smaller charity has shop sales under the present VAT registration limit, presently £67,000, it may consider the hassle of voluntary registration to be unnecessary.
This may not necessarily be the best course of action.
Presumably the charity will be paying rents for the use of the shop. It is likely that the landlord will have opted to add VAT to the rent charged. If so the charity will presently be absorbing this VAT as part of its costs.
The solution may be for the charity trustees to register on a voluntary basis, for VAT.
If this is done there will be no VAT to pay on the shop sales, as stated before these are zero rated; however it would now be possible to recover input tax charged to the charity for overheads specifically related to the shop trade. This could include VAT on rents and other direct overheads, telephone etc.
One final tip for charities who pay VAT on their rents. If your charity is paying rents for a building, or part of a building which is used solely for charitable purposes (other than as an office or shop) the supply from the landlord may be exempt from VAT. Even if your landlord is required by other VAT rules to charge VAT on rents this would be the case. If you have been overcharged as a result you could ask your landlord, if justified, to send you a VAT credit backdated three years!
If you feel that this may apply to your charity please call as we would be happy to negotiate or organise appropriate action on your behalf.
The latest email scam!
Please beware that you may receive an email purporting to be from H M Revenue & Customs offering to send you a tax refund if you provide certain information.
H M Revenue & Customs would never advise you of this type of transaction by email.
If you receive this e-mail please delete it immediately. Any action that you take to follow the link embedded in the e-mail will result in a request for personal information that will be used for fraudulent purposes.
Tax Diary August/September 2008
1 August 2008 - Due date for corporation tax due for the year ended 31 October 2007.
19 August 2008 - PAYE and NIC deductions due for month ended 5 August 2008. (If you pay your tax electronically the due date is 22 August 2008)
19 August 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2008.
19 August 2008 - CIS tax deducted for the month ended 5 August 2008 is payable by today.
1 September 2008 - Due date for corporation tax due for the year ended 30 November 2007.
19 September 2008 - PAYE and NIC deductions due for month ended 5 September 2008. (If you pay your tax electronically the due date is 22 September 2008)
19 September 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2008.
19 September 2008 - CIS tax deducted for the month ended 5 September 2008 is payable by today.
Disclaimer - please note: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.