Corporation Tax: Late Filing Penalties

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If you are the director of a limited company then you will be aware that you must submit a tax return to HMRC each year, declaring your personal income. The company, as a separate entity, must also submit a tax return and, much like a personal tax return, if the company return (CT600) is not submitted by the deadline, then penalties will be incurred.

The deadline for submitting the CT600 is 12 months after the company’s financial year ends. The corporation tax is due before the CT600 however, and should be paid within nine months and one day of the accounting year end.

If the CT600 is not submitted on time then an instant penalty of £100 will be incurred and, if the return is three months late, another penalty of £100 will be charged. In addition to these fixed penalties, if the CT600 is not submitted by six months past the deadline then HMRC can estimate the tax due and charge a penalty of 10% of that tax. Another 10% penalty will be incurred at 12 months late.

Ignoring penalty notices from HMRC will exacerbate the situation, so it is important to be aware of your company’s deadlines and adhere to them wherever possible.

For further information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Prevent Late Payment Penalties With A Time To Pay Arrangement

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For those seasoned Self Assessors the 31 January deadline will be all too familiar. This is when your tax return is due, along with your balancing payment and the first payment on account for the current tax year (if applicable).

You may not be so aware, however, of the late payment penalties that are imposed should any tax remain unpaid at 30 days, 6 months and 12 months after the 31 January payment deadline. The penalty is 5% of the tax outstanding at that date. So, for example, if any of your 2013-14 tax payment remains unpaid at 28 February 2015, 31 July 2015 and 31 January 2016, penalties will be imposed at each of these dates, at 5% of the tax outstanding.

These penalties can be avoided if you contact HMRC prior to the date on which they are imposed, and agree a ‘time to pay arrangement’ with them. The time to pay arrangement must be agreed and in place in order for the penalties to be suspended. Late payment interest, however, cannot be prevented and will accrue until the tax bill has been settled.

So, if you find yourself unable to pay your tax, then a call to HMRC before the tax becomes due could save further self-assessment debt. The number for the HMRC Business Payment Support Service is 0300 200 3835.

For further information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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HMRC Forced To Apologise For Shocking Service

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HM Revenue and Customs has been made to apologise for its “shocking” customer service which is leading to many small businesses struggling to complete tax forms.

Cuts at HMRC have included shutting 14 offices and inviting nearly 700 staff to accept voluntary redundancy last year alone. It has led to just over a third of telephone calls to HMRC contact centre being handled within five minutes, while a quarter were not answered at all.

It comes as a major blow to the many thousands of small business owners who struggle with the complex tax and accounting systems in the UK. Many frequently need help and advice , struggle to speak with an advisor, and can face major fines and penalties if they make a mistake. HMRC’s drive and focus on digital reform is majorly hurting those with limited computer access or know-how.

John Allan, chairman of the Federation of Small Businesses, said: “Small firms often find themselves wrestling with highly complex tax issues and many need help to navigate the system.  This can be highly stressful and confusing. Getting it wrong may lead to costly fines and time-consuming investigations.

“The recent evidence of poor performance by HMRC’s telephone contact centre is therefore disappointing. HMRC must do more to make sure that service levels are raised significantly.”

A HMRC spokesman said they were “sorry that some customers are struggling to get through” while commenting that plans are in place to “improve performance” and that 3,500 more staff will soon be in place in customer service centres.

If you are struggling with your tax enquiries, or are worried about potential fines and penalties, contact us at Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Leaving A Charitable Legacy In Your Will?

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As a nation we are constantly presented with opportunities to donate to the millions of charities which exist in the UK, whether it be taking part in or sponsoring fund-raising events, dropping our small change in collection boxes or paying a regular monthly amount from our bank accounts.

It’s a fact, however, that around 15% of the donations received by charities in the UK come from legacies specified in the Wills of the deceased. One reason for this may be because such donations are exempt from Inheritance Tax for the purpose of valuing an Estate.

There are 3 ways an individual can leave a charitable legacy:

  1. By donating a fixed amount (a pecuniary legacy).
  1. By donating a particular item of value – perhaps jewellery, art or shares in an investment (a specific legacy).
  1. By donating a share of what remains of the Estate when all debts, costs and other pecuniary and specific legacies have been paid (a residual legacy).

In all cases the charity concerned should be named, its registered address and charity number clearly stated in the bequest.

Qualifying donations can not only reduce the amount on which the 40% rate is paid, but where 10% or more of an Estate value is donated to a registered charity, a lower tax of 36% may apply.

As always, it’s wise to take professional advice before considering making a donation for the purpose of reducing or even eliminating any liability to Inheritance Tax.  The rules for this tax are not straightforward, and calculations (particularly when claiming the lower 35% rate) are complex and should be undertaken by a qualified accountant.  After accounting for liabilities, reliefs and exemptions, your Estate may not exceed the threshold of £325,000 anyway.

Some charities are offering a free Will-writing service if you include a legacy to them, but generally speaking, it is preferable to use the services of a solicitor. Where a Will is drawn up by a charity, there could be an argument for “undue influence” if other beneficiaries consider a charitable legacy to be inappropriate.

It’s worth knowing that an Executor, with the agreement of the other beneficiaries, can change a Will, to make or increase a charitable donation in order to allow the Estate to take the 10% test.  In other cases, the cost of obtaining valuations of the various components required to meet the complicated terms of the lower rate, may deem it disadvantageous to make the claim.

Of course, you don’t have to wait until you are dead to make a donation to your desired charity – if your reason for doing so is simply to support the cause!

For more advice on leaving a charitable legacy, please contact Green and Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Charities And The Tax Man

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Comic Relief earlier this year raised staggering amounts for good causes, home and abroad, earlier this year, and with over 164,000 charities registered with The Charity Commission as of September 2014, many more avenues are available for giving to charity. There are numerous ways to give to good causes, and donors can save on tax too, making it very much a “win-win” situation.

Here are just two ways:

Gift Aid

Gift Aid is a form of tax relief on your donations which works by the charities claiming the tax paid by their donors at the basic rate. It means that for every £1 donated to a charity or amateur sports club, they can claim an extra 25p on top. This is simply due to the fact that a tax payer would need to earn £1.25 to take home the £1 donation, as the tax man would receive 20% (25p).

In order to gift aid your donation, you need to make a gift aid declaration that includes your full name and address along with the charity details. If you choose to donate via sites such as Just Giving, it is as simple as ticking a box, and you can also gift aid on things you give to a charity shop.

 Give As You Earn

Many companies have signed up to a payroll giving scheme called ‘Give As You Earn’, and if you are a PAYE worker you can make regular donations to charity.

Give As You Earn is run by the Charities Aid Foundation and allows you to make regular or one-off donations to charities of your choice directly from your pre-tax pay packet.  This means that part of the donation is coming from money that would otherwise be going to the taxman. For example, if a basic rate taxpayer made a £100 donation, HMRC would top it up with the £25 tax amount and the charity would get £125.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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The Big Question – Encouragement to get active

Nick Park answers this weeks Big Question in the South Wales Argus:

“Britain is apparently in the grip of an obesity epidemic and people are being urged to get more active, whatever their age. Business Argus has asked the local business community what they do to help promote sport and wellbeing in the wider community.”

The Big Question Green  Co 16-06-15

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Changes To Rules For Collecting Tax Debts Through PAYE

From 5 April 2015 the limit of tax debt that can be collected via PAYE rose from £3,000 to £17,000, but the amount which can be collected through your code will now depend on the amount of income you receive during the year.

For people earning less than £30,000 the maximum which can be collected will remain at £3,000, but if an individual receives £90,000 or more in earnings, then a maximum of £17,000 can be collected through their PAYE code. Between these limits there is a graduated scale. This method is called “coding out”.

It is important to note that HMRC will only use this method where the tax due has not been paid voluntarily. They will firstly write to an individual explaining their intention to use this method, giving them the opportunity to pay the debt another way. If coding out would cause you financial difficulty, HMRC should be contacted as soon as possible, in order to make an affordable arrangement.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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