Numerico Chartered Certified Accountants

HMRC will use a “web robot” to search out traders who aren't registered, and fine them. What steps should new businesses take to make sure they're not penalised?
These days most businesses consider an Internet presence essential to their trade. HMRC has latched on to this fact and intends to use web robots to act as spies. These search programs will monitor millions of web pages and extract information, such as names, addresses and possibly much more.

Once the information is collected it will first be compared with HMRC's database of registered businesses. So if you haven’t registered your newly formed business within set deadlines you might be at risk of a challenge from HMRC. The result could be financial penalties.

Many businesses and their owners are falling behind with their tax payments. HMRC now have a singular approach to dealing with all taxes, including income tax, VAT or any other tax bill. If HMRC decide that you “can’t pay”, expect some sympathy and co-operation, but you’re in the “won’t pay” category, you’ll be in for a rough ride.

“Can’t pay” scenario: HMRC will be more amenable to negotiating deferred payments - so called “time-to-pay deals”. Under these arrangements late payment surcharges could be suspended or cancelled.

“Won’t pay” scenario: If on the other hand you’ve chosen to pay other bills, e.g. your suppliers, ahead of the tax liabilities, you can expect little mercy and HMRC will quickly move to enforce payment by county court proceedings - for which you’ll have to meet their costs. Some tax professionals have also reported a marked rise in the threat of bankruptcy proceedings for tax debts as low as £1,000.

The 2011 Budget confirmed that the IR35 rules won’t be scrapped.  Iinstead the administration of the system is to be improved. Spo what does this mean for your business?

The IR35 rules were introduced a decade ago to stop PAYE tax and NI dodging by running businesses through a limited company or partnership. If your company or partnership provides services, anything from property maintenance to staff training, then you need to consider the IR35 rules. These can impose PAYE tax and NI on your freelance income where it’s provided under conditions which would normally be considered an employment.

It was predicted to be a quiet Budget but instead it turned out to be full of surprises. So are they good or bad news for your business?

Corporation Tax cut.  Mr Osborne created a stir by cutting the main rate for Corporation Tax (CT) by an extra 1%. It was due to drop 1% to 27% from April 1, but it will now fall to 26%. It sounds good but in practice it only benefits companies whose profits exceed £300,000 per year. Those with lower profits are left with the pre-announced cut of 1% in the small profits rate to 20%.

Car mileage allowances increased.  From 6th April 2011 the Approved Mileage Allowance Payments (AMAPs) will increase for the first time since 2002/3. Businesses will now be allowed to pay up to 45p per mile tax and NI-free to employees, and directors, who use their own cars for business.
This will increase the tax advantages of employee car ownership schemes and similar arrangements so if you haven’t considered these before, now might be the right time.

Merger of taxes. It’s been announced that income tax and NI will be merged.  It will mean major changes for all employers; however it will be a couple of years or longer before the new all-in-one system will come into force. In any case it may well be a good thing as it will cut red tape for employers. We’ll update you on any future developments.

We are now right at the beginning of the new tax year and it is a good time to take a look at your tax matters and sort out all forms and paperwork, so here are a few points that are worth paying attention to.

• Employees and pensioners - check your coding notice It is advisable to check your PAYE coding notice each year. Whether you have a company car, make pension contributions, incur work related expenses or your tax code takes into account underpayments from earlier years make sure that all adjustments are calculated correctly.  If you notice any errors you can get in touch with HMRC (your coding notice should provide contact details) and request the necessary adjustments to your tax code to be made. But don’t delay this as new codes will start to be used by employers and pension providers from 6 April.
• Employers – Complete 2010/11 P. A.Y.E. by 19th May
  Most employers now have to file their year end returns online, including filing the Employers Annual Return (P35) together with P14s for individuals. Whether you are intending to file annual returns online or on paper, the forms must reach HMRC by 19 May.  All employers must give their employees’ copies of the P14 (P60) by 31 May.  There is now an option to distribute P60s electronically.  The deadline  for employers to pay 2010/11 PAYE is 19 April but interest and penalties may be due if HMRC find that employers have not paid PAYE on the correct dates throughout the year.