Just two months to the end of the current tax year, so this month we have included articles regarding changes to the tax system that we know will be included in the March 2011 Budget; the Budget date is already announced, 23 March 2011. We have also included details of the impending Business Record Check by HMRC!
Business Record Check HMRC – should you be concerned?
On 17 December 2010 HMRC announced their intention to roll out a programme of Business Record Checks in the second half of 2011. At present they are consulting with professional organisations regarding the scope of their enquiries. This consultation will be completed and the results published by 31 March 2011.
If your business is selected, HMRC staff will visit your premises and ask for access to all your business records. If they feel that there is a significant failure to keep proper records, penalties may be charged and additional tax assessments raised.
Here’s what we know so far:
Issues to be resolved by present consultation process:
The consultation is not concerned with whether HMRC should have powers to check business records, these already exist!
If HMRC are aware that your record keeping is defective this will no doubt trigger visits from a number of their departments. You may get additional PAYE/NIC or VAT audit checks for instance.
There are existing guidelines from HMRC on what constitutes satisfactory record keeping that will likely form the basis of their new Record Check processes. As the results of the present consultation become available we will include further information in this newsletter.
Employer related childcare (ESC) – loss of higher rate tax benefits
There are two changes to the present ESC scheme that currently allow employees to receive qualifying childcare vouchers up to a value of £55 per week.
The changes from 6 April 2011 are:
If you are a higher rate or additional rate taxpayer and you have not joined your employer’s ESC scheme you may want to reconsider. Individuals in a scheme at 6 April 2011 will retain their existing level of tax relief.
Furnished Holiday Lets – end of loss relief flexibility
At present owners of qualifying Holiday Let property can set off losses from the letting activity against their other earnings. From 6 April 2011 you will no longer be able to do this. From 6 April 2011 you will only be able to carry losses forwards to set off against future holiday let profits.
From a tax planning point of view this offers a short window of opportunity. Any Furnished Holiday Let losses that you make up to 5 April 2011 can be set off against other earnings for 2010-11. This could be an opportunity not to miss as higher rate and additional tax rate payers may receive 40% or 50% of the losses from HMRC as tax refunds.
If you are planning extensive, qualifying repairs to your FHL property(ies) now may be a good time to implement and complete before 5 April 2011.
VAT on certain postal services from 31 January 2011
Although the First and Second Class postal rates are unaffected, as are franked mail and standard parcels, there are a number of postal services that will include VAT from 31 January 2011. These include:
Express and tracked services
International Services (EU destinations only)
Advertising, Catalogues and Magazine services
If you are a business user of these services you should be able to reclaim the VAT. However businesses that use these postal services who are not VAT registered or have Exempt Services may have to absorb the 20% VAT increase.
Tax Diary February/March 2011