31 August 2010

The good the bad and the ugly

The good, the bad and the ugly of the online HMRC Self Assessment System.

The government claim that tax doesn’t have to be taxing , but I would warn all taxpayers to heed caution when dealing with the HMRC .
Experience has taught me , as a recent Watchdog programme highlighted, to assume you can rely on the actions and advice of the HMRC.
Don’t get me wrong , the online HMRC self assessment can be a very useful tool for both the layman and tax professionals. However, this article examines the good, the bad ,the ugly of the results of the growth of self assessment and in particular the online system.

Good Points:

1) Once registered, the individuals or agent personal history of tax returns, payments, rebates, statements can be viewed.

2) The system does a number of sense checks online , reducing errors in form filling and calculates tax due, allowing you to review this before submitting a tax return.

3) The system is now flexible enough to allow you to save a partially completed return to return to later, or even amend a submitted one , if an error or omission is discovered at a later date.

4) Most of my clients are bemused by the current on account payment system, mainly because it relies on past history of filed tax returns. They often struggle to understand large variations form year to year in tax paid. However, if you can forecast your current and future income , you can easily apply online to vary your on- account payments , allowing for more logical and consistent payments and improved cash flow management

5) Repayments can be requested online, and are usually paid direct into the clients bank account inside a few days.

6) It is easy to verify that payments you have made have been received and allocated against your account correctly.

But now the bad:

1) Although in registration , the response claims the client will receive an activation code 7 days, in practice , this is very hit and miss. I’ve known clients not to receive a code until 4 weeks after the request , and not always receive a code at all. You only have 28 days to activate the code and it can take a disproportionate amount of effort to activate the service. However, do pursue, I promise it is worth it in the end.

2) The increase in reliance on the online system has been matched by an increase in automated penalties, which are difficult to have reversed, even if for example, they relate to a client’s payment being misallocated by the HMRC. Again, if you are in the right, due pursue , as these things can eventually be tracked.

3) Coupled to the above point, the increase of the online system has led to a severe reduction and availability of tax officers to speak to on the phone. Certainly a large number seem to work part time, leave their phones unattended and clearly do not work on Friday afternoons. As with any organization there are competent and helpful staff around, but battling through the automated telephone systems to have a chance of hitting on one is a lottery. My tip here is to try to talk to somebody based in Scotland , and Saturday mornings seem to be a good time to call.

4) Never expect a repayment of tax due to you or your client to arrive. You need to ask. If you write in the chances are the letter will be lost , so my advice is to apply for the repayment online.

5) Because it is relatively easy to fill in a tax return online, there is a temptation for individuals to have a go themselves. In many cases this is harmless, but you would be surprised how many clients I come across who have done this and missed reclaims as a result, for things such as capital allowances, pensions contribution reliefs, travelling expenses etc..

And now the really ugly:

1) The HMRC can decide to investigate your tax return , one year after submission. My experience shows that if they are likely to do this, they will wait until week 51, just when your memory is beginning to fade, and you have spent the potential extra tax due.
At the point an investigation is launched, you really need professional advice.

2) Another nasty recent trick is to apply surcharges to clients, but actually write to either inform or explain. These can often be followed shortly by a letter, or even worse phone call, demanding immediate payment . If you challenge an explanation on how this amount is
derived, the caller usually admits they don’t have that information. Don’t be intimidated.

3) It would be dangerous to assume the HMRC staff understand all the tax rules and get things right. I’m still sore at the tax officer who informed my client they could not be an employee of their own company !! Again, there is no substitute for professional advice.

4) My final and most nasty trick is to write to clients telling them that they know no longer need to complete a tax return because tax is deducted at source from their income. However, I’ve just had 2 cases where if this advice had been taken, reliefs available would have been lost.

In conclusion, I believe the HMRC website and online self assessment system is a great tool. However, proceed with caution and unless you have very straight forward tax affairs, use a suitably qualified accountant or tax professional . For more information please do check out our website at www.taxreturns2go.co.uk or contact me at andrew@backofficesolutions.co.uk

21 January 2010

January 31 filing deadline - time is running out...

Do you have a self assessment to fill in? Time is running out as the January 31st deadline for filing online is rapidly approaching.

Many people aren't aware though that the process is not an immediate one. You will firstly need to register on the HMRC website after which you will then receive an activation code through the post within 7 working days.

With this in mind it is being advised that TODAY is really the latest you should leave it register. So even if you haven't started the number crunching you need to get online and register with HMRC.

Tip: Don't leave your filing until the very last day. You may have computer problems and this will most likely not be a good enough excuse.

If you need any help at all with your self assessment email us or call 01603 861617.



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Image: Salvatore Vuono / FreeDigitalPhotos.net

24 November 2009

Are you ready for the VAT increase?

On January 1st 2010 the standard rate of VAT will revert back to 17.5% from 15%.
There are some anti-avoidance rules to watch out for but for most the switch back should be straightforward. Here we will talk about the main rules and what you need to watch out for.

1. VAT is always calculated using a rate when a Tax Point (TP) occurs. The basic tax point is applied when the goods are supplied or the services are provided. Delivering a product or a service by 31st December 2009 means that the 15% rate applies. On or after 1st January 2010, the rate will revert back to 17.5%.

A good tip to improve your cash flow is to encourage your customers to pay early for supplies or services that will be provided after January 1st. Your customer only has to pay at the lower rate of 15% instead of 17.5% which is a great incentive. However, for this to be effective, your invoice must be dated on or before December 31 2009, or the goods or services must be paid for by 31st December 2009, even if the supplies or services are provided later.

2. Let’s say that the supply of goods or services you provide overlaps. You start in December 2009 and finish in January 2010. A typical example could be a software installation by an IT company that is using the Christmas period (when the office is quieter) to provide a corporate software upgrade. Any services (or goods) up to December 31 2009 would be charged at the 15% rate and any services (or goods) after that must be charged at the 17.5% rate.

As a guide any invoices after December 31 2009 that show supplies with both rates applicable (as in the example above), must show each VAT element separately.

3. If you provide a continuous service, such as a software support contract or bookkeeping, VAT is due at the appropriate rate when you get paid or raise an invoice, which ever is earlier.

Tip – Let’s say you issue a quarterly invoice on January 31 2010 for November, December and January. You simply show a 15% rate for services or supplies up to December 31 2009 and then a 17.5% rate thereafter. Remember to show each VAT element separately (as mentioned above in Item 2) on your invoice.

For full details of the VAT anti-avoidance rules take a look at the HMRC website.

If you need any further information please don’t hesitate to contact us.


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9 November 2009

An Introduction to Tax Returns 2 Go

October was an exciting month here at Tax Returns 2 Go with our official launch at the All-About-Business networking exhibition held at the Norwich City Football ground, Carrow Road. The exhibition had a great turnout and it was lovely to see so many people supporting local businesses. If you would like to meet our team, we will also be exhibiting at the Four Seasons Exhibition in support of Help for Heroes at Drayton Old Lodge on 26 November. For more information please contact me.



Meet the Team


Tax Returns 2 Go is an online tax return partnership comprising of Andrew Parker F.C.C.A, Chris Wright and Chris Wheeler.

Andrew Parker qualified as a chartered certified accountant in 1989. After a number of years, working in industry, he has been practicising as an accountant - covering, amongst other areas, tax matters since 2004. Andrew joined Back Office Solutions Ltd, as a Director, in 2008. Having previously advised as a consultant. Tax affairs are just one of his specialities. So, if you want general tax advice, or you have a specific tax enquiry, you want to know about personal tax liabilities, or you are Director who has to file personal tax forms and finds the whole tax area a complete nightmare, then Andrew is probably the best person to speak to.

Chris Wright has worked in both practice and industry prior to setting up Back Office Solutions Ltd in 2007 with the aim of offering quality Accountancy services and Business Consultancy at an affordable price.

Chris Wheeler runs an award winning marketing agency, Metalfrog Studios Limited, based in Norwich. The agency is unique in that it carries our all services in-house: website design and development, search engine marketing and optimisation, email marketing, graphic design and general business consultancy. It was Chris’s idea to create an online tax return service and he wanted to partner a quality, professional tax accountancy firm in this venture. Chris's role is to develop and design this website, and then to ensure that it reaches the top of the search engine listings.

Thank you for taking the time to visit us. Please join us next week for the first of our weekly tax articles and/or tips.

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