HMRC Risk and Intelligence service which is based in Cardiff has been issuing notices under S18a(2) TMA 1970 to online auction sites to request information about the members registers kept.

The auction sites are obliged, with no right of appeal, to provide the information as non compliance will result in an initial penalty of £300 plus up to £60 per day for continuing failure.

The information requested is going to be used purely to check on memebers to see that they are declaring and registered for tax correctly. Thus if you are an online trader who has not declared income from online trading activities,  you will need to make a disclosure to HMRC by 14th June 2012. The full disclosure and payment of outstanding tax then has to be made to HMRC by 14th September 2012.

Chris Bryce, chairman of PCG said:

‘HMRC’s new guidance demonstrates their fundamental lack of courage and committment to improve the operation of IR35′

Click here for a joint press release from PCG and other outside bodies

Link attached http://www.hmrc.gov.uk/ir35/guidance.pdf

If you have a payroll, you or your accountant needs to make sure these forms are submitted to HMRC by the May 19th or a minimum £100 penalty will arise. Fines and penalties escalate quickly for continued non submission.

If you are trading on Ebay or on Gumtree you may need to declare these incomes to HMRC and pay the necessary taxes on them. The problem is knowing whether or not you are trading.

This is a difficult question, and it is hard to obtain a straight answer to, but if you follow the principles below you should be able to take a view, and tell the taxman what he requires.

Do you make frequent sales? Frequent sales may indicate that you are trading if you are buying items with the intention of making a profit then you are trading.

Were the items sold personal to you? If you bought something for personal use or was gifted it as say a present, and later sold the item, then this is definitely not trading.

Did you intend to make a profit? If so you are most likely to be trading.

If in doubt take professional advice, this will help you avoid any tax and unnecessary penalties.

HMRC have claimed to have sent ourt 850,000 penalty notices to people who have missed the deadline for submitting the 2010/11 personal tax return deadline.

If you are one of the unlucky 850,000, you will be facing a penalty of £100. If you haven’t already done so yet, make sure you file your self assessment tax return as soon as possible otherwise if you are late by three months the penalty for each day after that is £10 per day for the next 90 days (£900 in fines) and if you still haven’t filed your self assessment by the 31st July you will ahve to pay the higher of £300 or 5% of any tax that you are owe for 2010/11

They now have automated bank feeds from Barclays a major UK bank, and are expecting to roll this out to other banks shortly.

http://www.freeagent.com/central/automated-bank-feeds-from-barclays

As with a lot of tax questions, you should always seek specialist advice, but providing your customer is VAT registered, which will exclude businesses trading direct to the general public such as plumbers and electricians, your customer, will be able to reclaim any VAT you charge.

The benefits to you are that you have the right to reclaim VAT paid on purchases and also have an improved cashflow i.e. you can hang onto the VAT that you charge your customers, for up to three months, before you pay the VAT man.

Firstly, IR35 has, and remains, a big issue for contractors since its introduction in April 2000. It was hoped the new Government remove or reform IR35 this has not happened.

In the 2011 budget, the Government promised improvements which included a dedicated helpline and promotion of more effective engagement through an IR35 forum to monitor HMRC’s new approach. This forum has sought to narrow down the types of companies targeted for IR35 investigations.

The budget announced that it would “introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those genuinely in business. This will include: strenghtening up specialist compliance teams to tackle avoidance of employment income; simplifying the way IR35 is administered.”

We will let you know what this means as soon as further information is available. We think it may relate to implementing ideas that have come out of the IR35 forum.

Secondly, limited companies used by high ranking public sector individuals have been making the headlines recently and the Government has been quick to address this public criticism in the budget.

From 2013 any organisation that engages “office holders” and “controlling persons who are integral to the running of an organisation will be required to deduct PAYE and NIC’s from payments made for the services to the individuals.”

This should not affect regular freelancers or contractors, it should only affect office holders, i.e. if you get taken on in the clients organisation as a director or take a very similar role in that organisation. It is not expected that many people will be affected , but the Government is consulting on this new rule and how it will work. It is expected to be effective from the 6th April 2013.

]]> http://www.freelanceraccounting.com/blog/?feed=rss2&p=446 0 http://www.freelanceraccounting.com/blog/?p=442 http://www.freelanceraccounting.com/blog/?p=442#comments Wed, 14 Mar 2012 10:50:50 +0000 admin http://www.freelanceraccounting.com/blog/?p=442 Are there any drawbacks in using a company for contacting? Yes whilst you will have heard that using a company you will generally save yourself a lot of tax as corporation tax rates are generally much lower than income tax rates, and a company with profits  of up to £300,000 currently pays tax at a rate of just 20% and company directors can pay themselves a mix of salary and dividends which will produce the lowest possible tax bill for them.

But it is not all positive, and it is worth pointing out some of the negative factors but these factors are generally significantly outweighed by the positive factors.

There is a small cost for registering a company with Companies House and getting it registered with HMRC for corporation tax, payroll and VAT. We currently charge £100+vat to do this.

You will incur higher cost in accountancy fees than if you were a sole trader or partnership, because  you are a company, (this should be outweighed significantly by the tax savings).

There are additional reporting requirements, such as your annual accounts and corporate tax return which will need to be filed with companies house and HMRC respectively, and there are significant fines and penalties for non or late filings. Your accountant will prepare these for you, but as a company director it is your responsibility to sign off on these.