May, 2011

Thousands of businesses missing tax return deadlines

Have you ever missed your tax return deadline?

If so, new research has found that you’re not alone.  Large numbers of small and medium sized businesses miss important payment and tax return submission deadlines every year whilst many other businesses are missing out on beneficial tax breaks and grants.

One in ten businesses have missed the tax return deadline

The recent survey from Yorkshire and Clydesdale Banks of 500 small businesses found that one in ten owners admitted to missing vital tax payments or tax return deadlines whilst almost one in five confessed to losing out on tax breaks and grants.

19 per cent of small business owners questioned had not taken advantage of tax advantages open to them whilst 10 per cent admitted to missing the deadline for their tax return or making late Value Added Tax (VAT) payments.

And, it seems that one of the major problems is that small business owners simply do not know where to turn for advice and guidance.  The research found that 15 per cent of people struggled to understand new tax rules whilst 16 per cent did not know who to ask for advice on regulation.

Gary Lumby, director of small business banking at Clydesdale and Yorkshire Banks, said: “For small businesses, every penny really does count, so the cost of falling foul of red tape can make a fundamental difference to their ability to succeed.

“In extreme cases, not understanding red tape could lead to them closing. It is worrying that a significant number of small firms do not know where to turn for advice on these matters and we hope to change that for our customers.”

Tax return deadlines

There are two deadlines for submitting a self assessment tax return depending on whether you use a paper based return or an online return.

All paper returns have to be received by HM Revenue and Customs (HMRC) by midnight on 31 October following the end of the tax year.  Online tax returns must reach HMRC by midnight on 31 January.

If you miss the deadline, you will face penalties.  If your tax return is just one day late you will pay a fixed penalty of £100.  If it is three months late, you will pay £10 for each following day up to a maximum of £900.  The penalties then increase if your return is 6 or 12 months late.

How Much Is VAT? And Other VAT Questions

If you’re buying any goods or services in the UK, the chances are that you’ll pay some Value Added Tax (VAT).  Companies add VAT to the price they charge for goods and services to both business and non-business customers.

For example, a clothing manufacturer would add VAT to the prices they charge a store whilst an electrical retailer includes VAT in the prices they charge you when you buy a TV or other appliance.

How Much Is VAT?

There are currently three rates of VAT in the UK depending on the specific type of good or service that is being provided.  These rates are:

  • Standard rate (20 per cent)
  • Reduced rate (5 per cent)
  • Zero rate (0 per cent)

Standard rate VAT – 20 per cent

The standard rate of VAT is charged on the majority of goods and services in the UK.  Most items that attract VAT will have the tax charged at 20 per cent.

For example, if the net price of a television is £300, VAT will then be added at 20 per cent (£60).  The price you pay will be £360.

Reduced rate – 5 per cent

Some goods and services in the UK attract VAT at a reduced rate of 5 per cent.  Such items include:

  • Children’s car seats
  • Sanitary hygiene products
  • Energy saving materials for installation (solar panels, insulation etc)
  • Domestic fuel/power (gas and electricity etc)

Zero rate – 0 per cent

There are a number of items in the UK that are ‘zero rated’, meaning that no VAT is payable on these items.  Examples of zero rated goods and services include:

  • Books
  • Most food (excluding hot takeaways or meals in restaurants and other items such as confectionery, ice cream, crisps, alcoholic drinks)
  • Public transport
  • Children’s shoes and clothes
  • Newspapers
  • Donated goods bought from charity shops

Why Don’t Some Businesses Charge VAT?

You may find that you don’t pay any VAT when you buy certain goods or services from small businesses.  This is because businesses that have a turnover of less than £73,000 do not have to register for VAT.

If the turnover of a business’ VAT taxable goods and services supplied within the UK for the previous year is more than the current threshold of £73,000 (or the business owner expects it to go over that figure in the next 30 days) they must register for VAT.

If a business has a turnover under £73,000 then you may not have to pay VAT on the goods or services you purchase.

Paying Tax If You’re Leaving The UK

Are you going to live or work abroad?

If so, you’ll need to know what tax you will continue to pay in the UK.  Our guide looks at when you do and don’t have to pay UK income tax when you move abroad.

Becoming non-resident for tax purposes

You’ll be treated as a non-resident from the day after you leave the UK if:

  • You can show that your visits to the UK are less than 183 days in a tax year and average less than 91 days a tax year over a maximum of four consecutive years
  • You can show that you left the UK to go abroad permanently or your absence and full-time work abroad lasts at least the whole tax year

If you’re leaving the UK you must tell HM Revenue & Customs (HMRC).  Your Tax Office will give you a P85 form (‘Leaving the United Kingdom’) in order that you can claim any tax refund that you’re owed.  HMRC will also work out if you’ll become non-resident.  If you still need to complete a tax return after you leave the UK, they’ll let you know.

Paying tax on your employment income

If you become non-resident, you won’t pay UK income tax on your earnings from working overseas.

However, if you’re non-resident but part of your work is in the UK, you’ll pay UK tax on the part of your earnings allocated to that work.  You usually allocate your earnings by looking at the number of days you work in the UK and the number of days you work abroad.

There are special rules for certain professions including seafarers, entertainers, students, Crown employees, oil workers and sports people.

Paying tax on other sources of income

Pensions

If you’re non-resident, you’ll pay UK tax on your UK pensions including your State Pension.

However, you may not pay UK tax if the country you live in has a ‘double taxation’ agreement with the UK. If you are a resident of a country with which the UK has a double taxation agreement, you may be able to claim exemption or partial relief from UK tax on certain types of UK income, such as pensions.

Property

If you’re non-resident and rent from UK property is paid directly to you, your tenant must deduct UK tax at the basic rate (currently 20 per cent).  If you use a letting agent, they’ll deduct the tax from the rent after any allowable expenses have been paid.

You can apply to have the rent paid to you without tax deducted if you don’t think you’ll have to pay any UK tax, although you’ll still need to declare the rent on a Self Assessment tax return if you’re required to complete one.

If the country you live in has a double taxation agreement with the UK you may be able to get relief there for any tax paid in the UK.

Interest

With regards to bank and building society interest in the UK, if you’re non-resident, the only UK tax you’ll usually pay is the tax deducted before you get the interest.  If you’re also ‘not ordinarily resident’ (i.e. you normally live outside the UK), you can get your interest without any tax being deducted by completing the R105 form and giving this to your bank or building society.

If tax has been deducted from your savings interest, you may be able to claim a refund by using the R43 form.

If you have any other questions, watch the short explainer video below or alternatively ask a question in the comments and we’ll personally answer it:

 

 

Claiming Back Fuel Expenses For Work

If you use your own car, motorbike or van for work journeys, you are eligible to claim back an allowance to cover the costs you will incur for these trips.

Our guide looks at what constitutes a ‘work journey’ in HM Revenue and Customs (HMRC) terms and how you go about claiming back fuel expenses you have incurred.

Defining a ‘work journey’

A work journey is a journey that you have to make as part of your employment.  Examples of what would be considered a work journey are:

  • Visiting clients at their homes in your own vehicle
  • Making deliveries to customers
  • Picking up and dropping off stock or raw materials from suppliers in your own vehicle

One common question asked by many people is ‘can I claim back fuel expenses for travel from my home to my place of work?’  The answer to this question is ‘no’.  Commuting to your normal place of work from home is not considered a ‘work journey’.

Claiming fuel expenses

The amount of fuel expenses that you can claim depends on the type of vehicle you are using.  HMRC publish a list of ‘mileage rates’ depending on whether you are using a car/van or a motorcycle.

You can claim the fixed mileage rate for your vehicle for the number of miles that you have travelled on work journeys.  Bear in mind that there is a maximum amount of tax relief that you are able to claim in a tax year, even if your fuel expenses exceed this amount.

Receiving expenses from your employer

Your employer may already pay you expenses to cover the costs you incur in using your own vehicle for work journeys.

If this amount is higher than the official HMRC mileage rate you will be liable for tax on the excess.

If the amount is lower than the official HMRC mileage rate, you can claim your fuel expenses for the difference.

You are able to claim Mileage Allowance Relief by using form P87 or by writing to your Tax Office.

Keep details of your work journeys

In order to ensure that you claim back all the fuel expenses that you are entitled to, it is important that you keep a record of all your work journeys.  If you plan to claim Mileage Allowance Relief from HMRC they will need evidence of the work journeys you have undertaken.

In addition, your employer is likely to need these records if you receive an expenses payment for the costs you incur by using your own vehicle for business purposes.

Car Tax Basics Everyone Should Know

Every registered vehicle in the UK must be taxed if it is used or kept on a public road. If you don’t tax your vehicle it could be clamped or removed.

Our guide looks at five of the basics of car tax that everyone should know.

What you need to tax your vehicle

In order to tax your car or other vehicle you’ll need several documents.  These are:

  • An MOT certificate (if your car is over three years old)
  • A completed V10 or V11 form
  • Your vehicle’s registration certificate (of the ‘new keeper’ section)
  • A completed application or a Vehicle Registration Certificate (form V62) if you don’t have such as certificate
  • Proof your insurance (at least third party)
  • Payment (unless your vehicle is exempt)

Insurance and MOT

Always make sure that your insurance certificates and MOT certificate are valid on the day you want your tax disc to start.  If you don’t, you will be unable to tax your car.

How to display your tax disc

Your tax disc has to be displayed in the vehicle.  It should be on the passenger side of the vehicle’s windscreen or on the kerb side of the vehicle (for example on a motorcycle).

A tax disc has to be displayed on the vehicle it relates to and cannot be transferred between vehicles.  Your tax disc is valid from the first day of the month you have taxed from and so you shouldn’t display your new tax disc until your old one has expired.

The maximum penalty for failure to display a current tax disc is £200.

Ensuring you don’t pay car tax if you don’t own the car

If you don’t tell the Driver and Vehicle Licensing Agency (DVLA) that you have sold, exported, scrapped or transferred your vehicle you will still be responsible for taxing it.  When you dispose of your vehicle make sure you send the appropriate part of the registration certificate to the DVLA.

Failure to tax your vehicle

If you don’t tax your vehicle (or complete a Statutory Off Road Notification (SORN)) you could be liable for a fine and your vehicle could be seized.

The DVLA carries out roadside checks as well as a computer check each month to identify those vehicles without a valid tax disc.  If you don’t have a valid tax disc you could face an automatic penalty of £80 as well as a minimum fine of £1000. In addition, your vehicle could be clamped, impounded or even crushed.