Q. The Tax Office has written to me saying £2,800 tax I owe will be collected by restricting my PAYE code for 2012/13. What does this mean?
A. The Taxman is now permitted to collect up to £3,000 of unpaid tax or overpaid tax credits through PAYE codes. Your PAYE code tells your employer how much of your income to treat as tax free, and thus how much tax to deduct from the rest. A common PAYE code for 2011/12 would be 747L, which gives you tax free income of £7,475 for the year. If you owe £2,800 in unpaid tax, and your highest marginal tax rate is 40%, your tax free income will be reduced by £7,000 (£2,800/ 40%), leaving you with tax free income of £475 and a PAYE code of 47L. The numbers will be slightly different in 2012/13, but essentially you will pay more tax each month from April 2012 until the tax debt is eliminated.
Wednesday, 5 October 2011
I've received a tax refund for 2010/11 but I haven't even submitted my 2010/11 tax return yet.
Q. I've received a tax refund for 2010/11, but I'm worried that it's not correct as I usually have tax to pay each year. Also I haven't even submitted my 2010/11 tax return yet.
A. You are right to be worried about the tax refund, as the Taxman's computer has issued some incorrect refunds recently. If you normally complete a self-assessment tax return but also have some income taxed under PAYE, the computer should wait until your tax return has been submitted before calculating the tax to be refunded. In a few cases this has not happened, and the tax refund has been based only on the taxpayer's PAYE income. Please ask us to check the tax calculation that should have arrived with your refund cheque.
A. You are right to be worried about the tax refund, as the Taxman's computer has issued some incorrect refunds recently. If you normally complete a self-assessment tax return but also have some income taxed under PAYE, the computer should wait until your tax return has been submitted before calculating the tax to be refunded. In a few cases this has not happened, and the tax refund has been based only on the taxpayer's PAYE income. Please ask us to check the tax calculation that should have arrived with your refund cheque.
How should I treat this sum for tax purposes?
Q. My cafe was badly damaged in the recent riots, but my loyal customers have collected £3,000 to help me open the business as quickly as possible. How should I treat this sum for tax purposes? Is it a personal gift, or a contribution to be set against my repair costs?
A. The taxman would view that this gift from your customers should be treated as income for your business for income tax or corporation tax purposes. You are likely to have a lot of repair expenditure to set against your income for the current period, so you may well not have a profit to declare even after including the gift as income.
A. The taxman would view that this gift from your customers should be treated as income for your business for income tax or corporation tax purposes. You are likely to have a lot of repair expenditure to set against your income for the current period, so you may well not have a profit to declare even after including the gift as income.
Thursday, 15 September 2011
I've had a call from the VAT office asking to come and see me. What have I done wrong?
Q. I recently applied for VAT registration for my business as the turnover had exceeded the compulsory registration threshold. Now I've had a call from the VAT office asking to come and see me. What have I done wrong?
A. A visit to a newly registered business is now normal practice for VAT officers, particularly where the first VAT return shows a repayment due. The VAT inspectors will want to see the invoices for your first VAT period, and be assured that you know how to keep adequate business records. We can sit in on the VAT visit to provide back-up for any difficult questions if you wish.
A. A visit to a newly registered business is now normal practice for VAT officers, particularly where the first VAT return shows a repayment due. The VAT inspectors will want to see the invoices for your first VAT period, and be assured that you know how to keep adequate business records. We can sit in on the VAT visit to provide back-up for any difficult questions if you wish.
What can he do to get his student loan records corrected?
Q. My son worked for a company that has gone into liquidation. The Tax Office are refusing to acknowledge the student loan repayments which were deducted from his salary in 2010/11 and pass those repayments on to the Student Loans Company. What can he do to get his student loan records corrected?
A. This can happen when the company folds before submitting its end of year PAYE return: form P35. This form shows the totals for all the deductions taken from each employee during the year. Your son needs to provide HMRC with any evidence he has of the student loan repayment deductions, such as original payslips or his form P60 for the tax year. HMRC should then pass this information onto the Student Loans Company who will correct his payment record.
A. This can happen when the company folds before submitting its end of year PAYE return: form P35. This form shows the totals for all the deductions taken from each employee during the year. Your son needs to provide HMRC with any evidence he has of the student loan repayment deductions, such as original payslips or his form P60 for the tax year. HMRC should then pass this information onto the Student Loans Company who will correct his payment record.
I received my self-assessment statement and payslip on 17 August 2011, which shows tax due to be paid by 31 July 2011
Q. I received my self-assessment statement and payslip on 17 August 2011, which shows tax due to be paid by 31 July 2011. I paid the tax due as soon as I could, but I am now worried that I will get charged interest and a penalty for late payment.
A. The late issuing of these statements was due to a lack of paper at HMRC's printers! As the delay was essentially their fault HMRC has decided to waive the interest due, as long as the tax payment is received by 27 September 2011. However, this interest free period only applies to the second payment on account of income tax for 2010/11, due by 31 July 2011. Any other late tax payments, such as tax due by 31 January 2011 will accrue interest as normal.
A. The late issuing of these statements was due to a lack of paper at HMRC's printers! As the delay was essentially their fault HMRC has decided to waive the interest due, as long as the tax payment is received by 27 September 2011. However, this interest free period only applies to the second payment on account of income tax for 2010/11, due by 31 July 2011. Any other late tax payments, such as tax due by 31 January 2011 will accrue interest as normal.
Monday, 1 August 2011
My employees are occasionally required to work late in the evening. If I pay for taxis to take them home is that cost tax allowable for the business?
Q. My employees are occasionally required to work late in the evening. If I pay for taxis to take them home is that cost tax allowable for the business and will the employees be charged tax on the taxi fare?
A. Where an employer pays for the travel costs of an employee for a journey between home and work (i.e. commuting), that cost would normally be a taxable benefit in kind for the employee. However, there is currently a particular tax exemption for late night taxis used when the employee is required to work past 9pm, and at the time the employee finishes work either public transport was unavailable or it would be unreasonable to ask the employee to use it, or car sharing arrangements have broken down. In this case the cost of the taxi is not taxable on the employee. But you can only use this tax exemption up to 60 times per year per employee. You need to keep accurate records of why each employee took a taxi to get home and the timing of those journeys.
This tax exemption for late night taxis is due to be abolished from April 2012, so you may need to reconsider your employees' travel arrangements in future. The cost of taxi journeys for employees on business or to or from work will always be tax allowable for the business.
A. Where an employer pays for the travel costs of an employee for a journey between home and work (i.e. commuting), that cost would normally be a taxable benefit in kind for the employee. However, there is currently a particular tax exemption for late night taxis used when the employee is required to work past 9pm, and at the time the employee finishes work either public transport was unavailable or it would be unreasonable to ask the employee to use it, or car sharing arrangements have broken down. In this case the cost of the taxi is not taxable on the employee. But you can only use this tax exemption up to 60 times per year per employee. You need to keep accurate records of why each employee took a taxi to get home and the timing of those journeys.
This tax exemption for late night taxis is due to be abolished from April 2012, so you may need to reconsider your employees' travel arrangements in future. The cost of taxi journeys for employees on business or to or from work will always be tax allowable for the business.
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