Tax Guru 02-2013

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 deadline for submitting 2011/12 self assessments (tax returns) to HM Revenue and Customs passed on the 31st of January. I would urge anyone who was asked by HMRC to submit a return and hasn't yet done so to act now. There is an automatic penalty which unfortunately you cannot avoid (except under the most unusual of circumstances), but there are also daily penalties that you will be incurring until the return is received. If you need any advice, then please contact your accountant.

Q: I am self employed and I submitted my tax return before the deadline, but I've found that I haven't put enough aside to pay the bill. Should I have put off filing my return until I had the money? And what should I do now?

A: Even though you can't afford to pay your tax, you did the right thing by filing your return. There would have been an automatically applied late fee of £100, with daily fees beyond that if you had left it till later.

Even though the Business Payment Support Service (a HMRC department which specialises in this area) will only consider making arrangements where tax is not yet overdue, it is still best to contact HM Revenue and Customs to keep them informed. Some of the questions they are likely to ask revolve around profit and cashflow, and they will want to know why you couldn't pay your bill on time. If they think you genuinely cannot pay right now then they may grant an extension to settling your taxes, however they will not reduce the amount outstanding and you will be charged interest.

Q: I saw something in an industry magazine that had me stumped. I supply services through a personal service company and I read that the government is planning to make changes to IR35 to include 'office holders'. Sorry I don't have a copy or an exact quote but can you give me an idea what this could mean?

A: For those who don't know, 'IR35' is about determining whether someone is self employed, or an employee. The amendment you've come across is about extending IR35 to 'office holders' and should be effective from April 2013 as part of the next Finance Bill.

Unfortunately there is still a little confusion at the moment as to what the term 'office holder' actually means as there is no statutory definition yet, although this is likely to be clarified by April. If we go by past general references and previous legal cases, then it is probable that it will refer to a post which is fundamental to an organisation, that is, a specific position at senior level.

There is a chance that substitution will play an important part and that limited company contractors that take up temporary senior managerial roles for specific positions may therefore fall foul of the amendments. Even if this is the case, it is unlikely that it will apply to roles that are purely linked to a project and where the organisation could appoint a successor.

To make things more complicated, current HMRC manuals state that a manager or a divisional head does not constitute an office. This is on the basis that these types of role only exist whilst the organisation wishes them too; they do not necessarily have longevity.

The short answer to your question is that, until the Bill is enacted, I cannot give you a definitive answer. I hope that what I have written has highlighted and summarised the speculation and therefore gives you a little forewarning about the possible amendments.

Q: I am about to upgrade all of the hardware that my staff use. This means that I don't have much use for my old computers. If I were to give them to my staff, what would be the tax implications?

A: You must report the gift of the computers on the HM Revenue & Customs form P11D and your business will incur Class 1A National Insurance (the exception is to any employees who are non directors and earn less than £8,500 per annum - they need a P9D form instead).

I assume that the use of these computers has not previously trigged a tax charge on the employees. On this basis, the value to declare on the form is the second-hand market value of the computers when you give them away. Please note that if you are VAT registered, then you need to add VAT on top of the market value.

If an employee is a director or they are earning more than £8,500, then they will have income tax to pay on the gift. If they are not, they will have no income tax or national insurance to pay.

The implications of gifting assets to your employees can be tricky as there are different valuations to use depending upon who the recipient is, if the asset has previously triggered tax charges onto the recipient and whether the asset has appreciated in value. So before you go ahead with any decisions about giving the computers to your staff, I'd advise that you speak to your accountant first to work out the exact figures.


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...

'The safest way to double your money is to fold it over and put it in your pocket.'

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.