Important Information About Tax on Life Insurance
When you cash in a life assurance policy or bond, the taxable amount you receive is treated as the highest slice of your income. The taxable portion won’t be the full proceeds, but it can increase your marginal tax rate so you pay more tax in one year than you would have if you’d made regular withdrawals over the life of the bond.

Top-slicing relief attempts to put you in the position you would have been in, had the lump sum been paid in equal amounts in each year of the bond’s life. It doesn’t exactly achieve that, but it’s a good approximation.

The problem is, HMRC’s computer hasn’t calculated the top-slicing relief correctly in every case. For example, where the taxable part of the bond pushed your income for the year over £100,000, part or all of your personal allowance is withdrawn. However, in the top slicing relief calculation your Personal Allowance should have been reinstated. It is this step the HMRC computer missed.

A recent tax tribunal case has determined that HMRC was wrong. If you received taxable income from a
life assurance bond in the last eight years, or you were an executor of an estate that received income from an offshore bond, ask us to double check the tax due.
 
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Check Your P60
Your employer should have sent you a P60 certificate for 2018/19 by now.

This shows your income from that employer in the tax year to 5 April 2019 and the total amount of tax deducted. If you also received taxable benefits in that year, such as a company car, you should receive a form P11D detailing the value of those benefits.

You will need both of those documents to complete your tax return for 2018/19, which must be submitted online by 31 January 2020, or by 31 October 2019 if you send in a paper tax return.

Don’t just blindly copy the figures from the P60 and P11D on to your tax return, think about what they represent. If your employer makes a mistake when completing the P60, and you reflect that mistake on your tax return, you are responsible for that error.

An incorrect tax return can attract penalties of up to 30% of the underpaid tax, or 70% of the tax for a deliberate error. A tax tribunal recently upheld penalties where a taxpayer didn’t check the P60 figure and as a result understated his salary by 45%. He also failed to declare his taxable benefits.

We can complete your tax return for you, to avoid such drama - just call u son 01462 791079
 
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How to Cut Tax on Company Cars
There are three ways to reduce the tax payable by an employee or director who is provided with a company car: choose electric or hybrid, a ‘clean’ diesel, or take a van. Electric and hybrid cars with CO2 emissions of up to 50g/km currently attract a taxable benefit of 16% of their list price, which doesn’t encourage companies to buy the more expensive electric models.

However, from 6 April 2020 the taxable benefit of having a purely electric car will be only 2% of its list price. Hybrids with emissions of less than 51g/km which can drive 130 miles or more on electric power, without recharging, will also be taxed at 2% of list price next year. The taxable benefits of such hybrid models will increase as the electric-only range decreases. New ‘clean’ diesel cars are now being sold that meet the Euro standard 6d.

This gives them two advantages:

• the taxable benefit is calculated as if it was a petrol vehicle; and
• the £12.50 daily charge in London’s ultralow emissions zone does not apply.

Diesel cars which don’t meet the Euro 6d standard have a 4% supplement on the percentage of list price, up to a maximum of 37%. This will also apply to diesel hybrids from April 2020. An employee is taxed on a flat amount of £3,430 if they use a company van for private journeys, or £2,058 for an electric van. This applies irrespective of the list price of the van.

So providing a commercial vehicle instead of a car can save the driver a lot of tax. However, you need to check whether a multi-purpose vehicle was primarily designed to carry goods rather than people. A van with two rows of seats may fail this test. The definition of a van for VAT purposes is different again, and will depend on how much weight it is designed to carry.

We can help you work through the many tax implications of buying a company car or van. Just call us on 01462 791079
 
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How to Avoid the VAT Penalties
If you don’t submit your VAT return on time, or fail to pay the VAT due on time, HMRC will put your business on the fiscal naughty step.

HMRC should tell you that your business is on its watch list by sending you a Surcharge Liability Notice (SLN), and a help letter if this is your first offence.

If you repeatedly file VAT returns late or pay VAT late, the SLNs will carry on arriving and penalties will be charged. These start at 2% of the late-paid VAT (minimum of £400), and the percentage rises each time an SLN is issued until it reaches 15% of the VAT that was paid late. If HMRC receives the VAT payment even one day after the due date, this still counts as ‘late’.

The key to this process is the receipt of an SLN. If the business does not receive an SLN, any default surcharge (i.e. a monetary penalty) issued on the back of that SLN is invalid. HMRC doesn’t keep copies of all the SLNs it issues, but it should keep an accurate list of the address each was sent to and when it was issued. If you receive a VAT penalty out of the blue, and you weren’t aware your business was in default with VAT payments or VAT returns, you can appeal against the penalty.

There have been several cases recently where the tax tribunal has overturned VAT penalties because HMRC couldn’t prove that the SLN was correctly issued. Tip: if you have problems submitting your VAT return under MTD, make sure you pay your VAT on time, as that will neutralise any fiscal penalty

For advice on VAT, SLNs and any and Tax issues call us on 01462 791079
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