Why would you want to file your tax return early?

The end of this month, for example, is the deadline for filing a paper version of the 2014-15 self assessment tax returns, and if you file online, the deadline is 31 January 2016.

A significant number of taxpayers still file after the deadlines and seem happy to pay the late filing penalties and interest on unpaid tax if any falls due. A remarkably larger number seem content to wait and file at the last minute. So what are the advantages of filing earlier? Two spring to mind:

1. If any tax is due you will have more time to accumulate funds to pay it, and

2. If you have overpaid tax you will get the money back sooner…

If you have a professional advisor there are additional benefits. It is possible to process your tax information and review your tax position prior to filing. This will ensure that no planning opportunities have been missed and any remedial actions can be taken before the return is sent to HMRC.

There are not many strategies that can be legitimately used in arrears, but there are a few. For example, in certain circumstances it is possible to pay charitable donations after 5 April 2015 and carry back the higher rate tax relief to 2014-15. If you want to make the most of the advice that we can give, give us time to research and plan. Bringing in your tax records in the last weeks of January to file the previous year’s tax return is counterproductive. The early bird really does get the benefit of reasoned tax advice and you will know, in advance, what your tax payments are likely to be for the next year.

In a recent insolvency investigation Richard Price and Timothy Porter, both directors of Recruit Investments Limited, which headed up a group of businesses specialising in labour recruitment, have been banned from being company directors for 6 years and 5 years respectively for transferring company assets for no consideration, including Arabian horses and money to one of the directors and parties unconnected with the company.

The insolvency Service investigation, which led to the disqualifications, uncovered that Mr Price and Mr Porter:

• transferred company assets with a value of £242,640, which included a number of Arabian horses, to parties unconnected with the company for no consideration in return
• paid £165,541 of company money to Mr Price and/or unconnected parties without due regard to the interests of the company’s creditors, who were largely left unpaid. The funds were withdrawn and the assets transferred at a time when Mr Price and Mr Porter were, or ought to have been, aware that the company was insolvent and unable to pay its debts as and when they fell due.

Recruit entered into liquidation on 12 November 2013 with a deficiency of £2,656,328. Mr Price and Mr Porter gave undertakings to the Secretary of State for Business, Innovation and Skills on 19 August 2015 and 08 August 2015 respectively which prevents them from being directly or indirectly becoming involved in the promotion formation or management of a company until 22 September 2021 and 31 August 2020 respectively.

Jane Knight, Senior Investigator, Insolvent Investigations – Midlands and West said:

The Insolvency Service will rigorously pursue company directors who seek to benefit themselves ahead of their creditors by extracting company funds when others are not being paid.

Limited liability protection is only available to those who comply with their obligations as company directors. If those obligations are ignored, that protection will be withdrawn.

You will have automatic copyright protection for writing and literary works, art, photography, films, TV, music, web content and sound recordings

‘Design right’ automatically protects your design for 10 years after it was first sold or 15 years after it was created – whichever is earliest. You can use it to stop someone copying your design.

Design right only applies to the shape and configuration (how different parts of a design are arranged together) of objects. You can also register your design for better protection provided it meets the eligibility criteria. You must register a design to protect 2-dimensional designs such as graphics, textiles and wallpaper.

You’ll need proof of when you created a design if you want to claim design right. This could be copies of your design drawings or photos:

• kept with a bank or solicitor
• that you’ve sent to yourself by registered, dated post and kept unopened

Protection you have to apply for includes:

1. Trade Marks: for example product names, logos and jingles.
2. Registered designs: covers the appearance of a product including shape, packaging, patterns, colours and decoration.
3. Patents: inventions and products including, machines, machine parts, tools and medicines.

The time it takes to register these various protections varies from one month to around five years (in the case of patent applications).

You could register more than one type of protection. For example: register your name and logo as a trade mark; a product’s unique shape as a registered design; patent a new working part; or use copyright to protect your drawings.

 1 October 2015 – Due date for Corporation Tax due for the year ended 31 December 2014.

 19 October 2015 – PAYE and NIC deductions due for month ended 5 October 2015. (If you pay your tax electronically the due date is 22 October 2015.)

 19 October 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2015.

 19 October 2015 – CIS tax deducted for the month ended 5 October 2015 is payable by today.

 31 October 2015 – Latest date you can file a paper version of your 2015 Self Assessment tax return.

 1 November 2015 – Due date for Corporation Tax due for the year ended 31 January 2015.

 19 November 2015 – PAYE and NIC deductions due for month ended 5 November 2015. (If you pay your tax electronically the due date is 22 November 2015.)

 19 November 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2015.

 19 November 2015 – CIS tax deducted for the month ended 5 November 2015 is payable by today.

If you are considering, or already are, selling your products and services in the EU, you may want to read the following recent announcement published on the UK government website.

“Emerging Europe offers opportunities for all UK companies ranging from novice to experienced exporters, and across multiple sectors.

Emerging Europe is made up of 11 markets and over 120 million consumers located in Central and Eastern Europe (CEE).

This region offers:

• increasingly affluent consumers
• economic growth at double the rate of western Europe
• widespread use of the English language
• low risk compared with other Emerging Markets further from the UK
• easy accessibility from the UK – just 2 to 3 hours flying time on low cost airlines

UK exports are worth over £16 billion, with goods exports doubling over the past decade, and services exports – over £4 billion – trebling.

What is Emerging Europe?

Markets of Emerging Europe are at differing stages of development, but all offer long-term growth prospects for UK companies. The markets are:

• Austria
• Bosnia and Herzegovina
• Bulgaria
• Croatia
• Czech Republic
• Hungary
• Poland
• Romania
• Serbia
• Slovakia
• Slovenia

Benefits of doing business in Emerging Europe

The markets offer UK companies a number of advantages including:

• ease of developing business relationships as located close to UK with access via large number of budget airlines
• ideal for Small and Medium Enterprises (SMEs) on tight budgets
• supply chain opportunities in support of strategically important industries
• opportunities resulting from £170 billion European Union (EU) Structural and Cohesion funds for 2014 to 2020
• UK’s positive image as a reliable business partner and increasingly as a source of innovative products and services and new technology

Opportunities

There are opportunities across a range of sectors. These include:

• advanced manufacturing
• defence and security
• energy
• healthcare and life sciences
• infrastructure
• services (financial and professional services, e-commerce and traditional retail)”

 Changes to these rates from 1 September 2015 are:

• Petrol: engine size 1400cc or less – 11p per mile
• Petrol: engine size 1401cc to 2000cc – 14p per mile
• Petrol: engine size over 2000cc – 21p per mile
• LPG: engine size 1400cc or less – 7p per mile
• LPG: engine size 1401cc to 2000cc – 9p per mile
• LPG: engine size over 2000cc – 14p per mile
• Diesel: engine size 1600cc or less – 9p per mile
• Diesel: engine size 1601cc to 2000cc – 11p per mile
• Diesel: engine size over 2000cc – 13p per mile

These rates can be used to calculate the recovery of VAT input tax on the cost to a business of mileage payments made to employees, or to calculate the amount an employee needs to reimburse an employer for the private fuel used by a company car.

From April 2016, you won’t have to pay tax on interest received up to £1,000 (if you are a standard rate taxpayer), or £500 if you pay tax at the higher rate.

Therefore, to be eligible for this new allowance in 2016-17:

• Your taxable income needs to be less than £42,700 a year to qualify for the £1,000 PSA, or,
• Your income needs to be between £42,701 and £150,000 to qualify for the £500 PSA.

To facilitate this change, from April 2016 banks and building societies will stop automatically taking the 20% Income Tax from the interest earned on your non-ISA savings accounts.

Readers who receive substantial interest on their non-ISA savings should take this latter fact into account. For 2016-17 their investment income could create an increase in underpayments in their tax position as they will receive their interest gross, no tax deducted. For example, there will be those who haven’t had to pay tax to HMRC because all their income was taxed at source. This group may be required to pay their tax separately in future.

This could particularly affect certain pensioners and the like benefitting from the £5000 nil “savings rate” of tax applying for 2015-16 only.

In the last two editions of this newsletter we have outlined the impact of the changes to the taxation of dividends that will commence 6 April 2016.

This month we want to continue to look at this major change as it affects the shareholder directors of private limited companies.

For 2015-16 any dividends drawn by shareholders that form part of their income taxed at the standard rate, will attract no personal tax on amounts taken. If the dividends form part of their income taxed at 40% or 45%, then the additional personal tax due is calculated as 32.5% or 37.5% respectively – of the gross dividend received – less the present 10% tax credit.

As previously discussed, from 6 April 2016, the way dividends are being taxed will change. The 10% tax credit is being abolished and each individual will have available a flat rate dividend allowance of £5,000. Any dividends received by an individual in excess of £5,000 will be taxed as follows:

• 7.5% if your dividend income is within the standard rate (20%) band
• 32.5% if your dividend income is within the higher rate (40%) band, and
• 38.1% if your dividend income is within the additional rate (45%) band

A director shareholder who presently receives a £27,000 net dividend as part of his remuneration package, and all of this income falls to be part of their standard rate band, then no additional tax is payable. With no change in strategy, for 2016-17 the same dividend will create an extra personal tax liability of £1,650.

 This amount will usually form part of the director’s Self Assessment underpayment for 2016-17 and be due for payment 31 January 2018. On the same date the director will be required to make a payment on account for 2017-18; accordingly, the extra tax of £1,650 coverts into tax payable of £2,475 on 31 January 2018 (£1,650 plus 50% of this amount as payment on account for 2017-18), with a further 50% or £825 payable as a second payment on account 31 July 2018.

 Should you compensate for this tax increase by increasing your salary? The answer would generally be no, as that would mean 12% employees’ NICs and 13.8% employers’ NICs. It may be possible to offset any additional employers’ NICs due by claiming the £2,000 Employment Allowance (£3000 from April 2016, but beware new restrictions from this date for “one-man” companies).

Unfortunately, in most, if not all cases, where dividend income is a significant part of your remuneration package, this change in legislation is likely to mean that you will pay more personal tax from April next year.

 Interestingly, a higher rate tax payer receiving the same £27,000 cash dividend will only be £400 worse off.

 It should also be noted that the £5,000 allowance is not an exception but a nil rate tax band. The full dividends still count as income e.g. for calculating the effect on personal tax allowances.

 There are limited planning options, including changing the scale of dividends taken before 6 April 2016. Business owners need to plan for these tax increases and we recommend that you seek professional advice as soon as possible.

UK businesses were recently warned about the growing risk of cyber attacks as Minister for the Digital Economy, Ed Vaizey, urged businesses across the country to protect themselves by taking up the Government’s Cyber Essentials scheme.

Whilst businesses are reaping the benefits of operating online and now earn £1 in every £5 from the Internet, cyber attacks are now considered a serious threat to UK businesses. The latest figures reveal that 74 per cent of small businesses, and 90 per cent of major businesses, has had a cyber breach of security in the last year.

Speaking at the Financial Times Cyber Security Europe Summit, the Minister revealed more than 1,000 businesses have now adopted Cyber Essentials – the UK Government’s leading scheme which protects businesses against the most common threats on the Internet. Intel Security, part of multinational technology firm and chip manufacturer Intel, are among the firms who have recently achieved Cyber Essentials certification.

Speaking at the conference, the Minister also announced a new £500,000 fund to help universities and colleges develop innovative teaching and learning to provide the cyber security skills needed to protect the UK now and in the future.

Digital Economy Minister Ed Vaizey said:

Good cyber security underpins the entire digital economy – we need it to keep our businesses, citizens and public services safe. The UK is a world leader in the use of digital technologies but we also need to be a world leader in cyber security.

Trust and confidence in UK online security is crucial for consumers, businesses and investors. We want to make the UK the safest place in the world to do business online and Cyber Essentials is a great and simple way firms can protect themselves.

Since launching the National Cyber Security Programme in 2011, Government has invested £860m to protect and promote the UK. Based on analysis by GCHQ which showed how cyber criminals were exploiting basics weaknesses in company IT systems, Cyber Essentials sets out five technical controls which will protect firms against the majority of internet threats, like viruses, malware and hacking.