Hello again!

My name is Andrew Richardson and I have been running TaxAssist Accountants in Elgin for five years. I am hoping that this tax advice section will become an interactive feature. Submit your tax and accountancy questions to Moray Life and I’ll answer a sample of them each month, along with a brief summary of the tax issues we should be looking out for.


The biggest event taking place at the end of this month is the deadline for Self Assessment tax returns. Returns arriving after this date face an automatic penalty of £100, plus an additional £10 per day up to a maximum of £900. If a return is over six months late then another £300 or 5% of outstanding tax is applied (which ever is greatest). This is repeated once again if a return is 12 months overdue.

Anyone who has been asked to complete a tax return for 2011/12 by HM Revenue and Customs needs to complete one before the 31st of January. These requests are usually sent in April by post. If you haven't received a request, but believe that you should complete a tax return then contact HM Revenue and Customs as soon as you can.

Q: Who needs to complete a self assessment tax return?

A: Anyone who receives a request from HM Revenue and Customs needs to complete a tax return. There are a number of people who need to complete a self assessment and if you fall into one of these categories below at any point between the 6th of April 2011 and the 5th of April 2012, and you haven't received a request, then please contact HMRC as soon as possible:

  • The Self Employed
  • Directors of a Limited Company
  • Those with untaxed savings and investments over £2,500 (not including ISAs)
  • Those with an annual income over £100,000
  • Those claiming expenses or reliefs valued over £2,500
  • Those with overseas income
  • Those with income from trusts, settlements and estates
  • Those who have Capital Gains Tax to pay
  • Those who have rental income over £10,000 (or over £2,500 after allowable expenses)

In addition, there are a few rules regarding those claiming age-related allowances who receive an income above a certain threshold (for 2011/12 this was £24,000) as well as those with certain residency or domicile issues. If in doubt please contact an accountant or HM Revenue and Customs for clarification.

Q: I recently engaged a factor to collect some debts from my customers. How do I go about accounting for this? I've already received some cash from the factor and I'm not sure what to do. I don't know if this makes things more complicated, but I've had problems with customers paying in the past, so I am now on the Cash Accounting Scheme for VAT.

A: Technically speaking, the cash you received from the factor is in fact a loan and is therefore exempt for VAT purposes. So you do not need to account for the VAT on the debts at the point you receive payments from the factor.

Instead, you account for the VAT in the VAT period the customer pay the factor. The factor should issue you with statements, so that you can identify when and how much a customer pays.

You should account for the VAT on the amount the factors manage to recover; not the original invoiced amount. Please also note that if the factor deducts any commission or charges before remitting you the balance, you should continue to base the VAT on the amount the factor received from your customers; not the lower amount they eventually paid you.

Q: I have received a letter saying that HMRC are going to call me about my record keeping under their Business Records Checks programme. How should I handle it?

A: Try not to panic at this stage. HM Revenue & Customs (HMRC) will be calling to ask you a few simple questions about your records. They estimate these calls will only last about 10 to 15 minutes.

There are three possible outcomes from the call:

They might be satisfied that you are operating your records effectively and that's the end of it; They might think you need some additional support so they may refer you to their appropriate department for record keeping training and education; or Worst case scenario, they think your records sound inadequate and they will arrange to come and visit you.

But even in the event they come and visit you and aren't happy with your bookkeeping management, they cannot fine you instantly under this programme. You should be offered time and support to improve your systems. The Business Records Checks are designed to be educational rather than punitive.

Q: When I submitted my Tax Credits renewal forms, I had to estimate my self-employment income because I had not drawn my accounts up. I have now completed my accounts and I am about to file my tax return. Will the Tax Credits office be informed of the actual figures on my tax return?

A: Sadly not I am afraid. You will have to give the Tax Credits Office a call to inform them of your actual figures and you must do so by 31st January.

If you fail to meet the January deadline, your tax credits won't stop but the tax credits you receive from 6th April may not be accurate. And if you're overpaid, you may have to pay it back later- and you may even be charged a penalty.

HM Revenue & Customs telephone numbers change fairly frequently, so it's always best to check their website (www.hmrc.gov.uk) for the present Tax Credits Office number.


I hope you all had a great Christmas and New Year. If you have a tax query then please submit your questions to Moray Life and I'll try to give a response next month. And always remember...

'Ask not what your accountant can do for you, but what you can do for your accountant.'

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.