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Scottish Rate of Income Tax

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Newsletter July 2015

This month’s newsletter reviews the following topics.

tax planning

Business start-ups

If you are an old hand at setting up a new business most of the content of this article will be a timely reminder of the issues you need to cover in your project to-do list. For first timers, use this article as a guide to see you through what can prove to be an exhilarating and challenging adventure.

Planning and research

Your planning and research should at least cover the following issues:

  • What does it take to run your own business?
  • What skills will you need?
  • What do you know about your competitors?
  • How much capital will you need to raise?
  • What resources will you need, plant, equipment, computers etc?
  • Could you start on a part-time basis and delay leaving the day job?
  • Can you run your business from home?

Also be aware that none of us operate in a vacuum. What special considerations do you need to look out for taking into account the present economic conditions?

Red tape

There is no doubt that at times you will just have to deal with it. Here are a few tips that may make the process less painful.

  • Find out exactly what is required, what forms need to be filled in and when they need to be submitted.
  • If you feel that a particular process is beyond your abilities find a professional advisor to help, the cost will generally be recovered by time that you are able to free up to work on your business.
  • If you want to complete the online filing or form filling make sure you read the fine print…

Red tape seems to be a necessary evil in our highly organised society. If you do find yourself beating your head against a brick wall, save yourself the headache, get some help

Tax planning

Whatever you do, don’t underestimate the UK tax system. Be very clear what your obligations are and the ways you can organise your business affairs to save tax. There is no point in planning for your tax liabilities after the event! The time to plan is before you act. This is a really important point. Tax specialists, us included, take no joy in advising tax payers that they could have saved themselves tax if only they had acted in a certain way at some time in the past. The tax system is riddled with deadlines that once passed, deny you tax saving opportunities.

Scottish Rate of Income Tax

From April 2016, the Scottish Parliament has devolved powers to set the Scottish Rate of Income Tax (SRIT). Within the last few weeks it has been widely publicised that this may mean a higher rate of Income Tax in Scotland as compared to the Income Tax rates in other parts of the UK.

HMRC have also issued a technical statement that clarifies who will be subject to SRIT.

According to the statement issued, a Scottish taxpayer will be defined using a simple test:

“For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.”

Factor in the possibility that Income Tax rates in Scotland will be higher than the rest of the UK and tax payers living and working in the border areas may need to reconsider their living arrangements.

For example, a business person living and working in Edinburgh will pay the SRIT from April 2016. If they relocated their family home to say Berwick on Tweed, and continued to work in Edinburgh, they would pay the UK Income Tax and not be subject to SRIT.

Turning this example on its head; consider a person living in Scotland and working in England. They would be subject to SRIT even though their income was earned in England.

Does this mean the north of England will become the UK’s Monte Carlo as wealthy Scots seek to establish tax residence in England to avoid SRIT?

Summer Budget 2015

Next week, Wednesday 8th July, George Osborne will present his first budget of the new parliament.

He has indicated that there will be no hikes in the major taxes: Income Tax, National Insurance, VAT and Corporation Tax. We shall see…

What he will be revealing is how he intends to reduce public expenditure in order to meet his commitments to reduce our growing national debt.

We will likely see further legislation to combat tax evasion and the re-introduction of the few issues that were dropped from the March 2015 Finance Bill in order to expedite matters before the general election.

Summer Budget 2015

Under and over payments of tax 2014-15

HMRC have started the process of sending formal statements to taxpayers who may have under or over paid Income Tax for 2014-15.

In a recent press release they said:

“We are sending P800s that show an overpayment of tax first, followed by a cheque around a fortnight later. You don’t need to do anything.
The whole process should be completed in October.

This automated process ensures those who have had a change in circumstances during the last tax year (2014-15) that was not captured in their tax code have paid no more or less than they should. Any discrepancy could be because the taxpayer changed jobs, had more than one job for a time, a change of company car or received investment income that was not reported during the year.

The vast majority of PAYE taxpayers will have paid the right amount of tax for the year and will not be contacted by HMRC.”

We advise taxpayers who receive a statement, and they are unsure if the figures are correct, to take professional advice – get the numbers checked.

Tax Diary July/August 2015

1 July 2015 – Due date for Corporation Tax due for the year ended 30 September 2014.

6 July 2015 – Complete and submit forms P11D return of benefits and expenses and P11D (b) return of Class 1A NICs.

8 July 2015 – The second Budget Day for this year.

19 July 2015 – Pay Class 1A NICs (by the 22 July 2015 if paid electronically).

19 July 2015 – PAYE and NIC deductions due for month ended 5 July 2015. (If you pay your tax electronically the due date is 22 July 2015)

19 July 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2015.

19 July 2015 – CIS tax deducted for the month ended 5 July 2015 is payable by today.

1 August 2015 – Due date for Corporation Tax due for the year ended 31 October 2014.

19 August 2015 – PAYE and NIC deductions due for month ended 5 August 2015. (If you pay your tax electronically the due date is 22 August 2015)

19 August 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2015.

19 August 2015 – CIS tax deducted for the month ended 5 August 2015 is payable by today.

Contact chartered certified accountants if you need any further help or assistance on any personal and company taxation matters.

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