by James Mason
26 November 2011
This is Fifth Element, December 2011, and this is the news
Sometimes it seems that the world of business and tax is a continually changing and constantly evolving series of complex problems and issues; principally because it is. To counter this, we hope that our ‘What’s Hot’ periodic updates will help with the necessity of keeping up to date; and on that note here’s our latest review.
This is hot…
Reasonable excuse
The law says that the penalty for submitting a late self-assessment tax return may be rescinded where there is ‘reasonable excuse’. No surprise that HMRC’s opinion of reasonable excuse is fairly biased, but in a recent tribunal one judge said of the taxman that his action “smacks more of the conduct of a disreputable debt collector than of responsible conduct by an organ of the state”. Pretty strong stuff. HMRC will hopefully re-think its position as a result, so consider appealing a penalty if you have good reason.
Entrepreneur’s Relief
Until recently, the sale of your company in exchange for shares and other securities in the takeover company was ignored for CGT purposes on the grounds of it being a ‘paper-for-paper’ transaction. The problem then arose that any sale of new shares was potentially liable to 28% CGT. The good news is that recent tax changes mean you can now elect to dis-apply the rule and take advantage of 10% Entrepreneur’s Relief.
Tax-effective repairs
The taxman will always want to argue that repairs to capital assets are replacement or improvement. Any ‘repair’ costs are then considered capital in nature and, in the case of property, you may not get the tax relief for some time. Key issues to be aware of are: a) you are allowed to use better materials; b) keep as much of the original asset as you can and; c) don’t unnecessarily improve the function or performance of an asset.
This is not…
Wrong PAYE Code
Operating the wrong tax code for an employee is one mistake that crops up frequently and which HMRC will use to make you liable for any underpaid taxes. Inform HMRC that you are correcting on a ‘week 1/month 1’ basis if you spot a mistake as this avoids a big tax hit for your employee and contacting HMRC should demonstrate reasonable care.
New penalty rules
The taxman continues to whittle away at increasing his penalty regime of indirect tax collection through the back door. In his latest initiative he has withdrawn the zero-penalty for a late 31 October paper tax return where there is no tax liability and future late paper-nil-returns will be subject to the £100 penalty.
And finally…
Thinking about 2011, we started in recession, rallied slightly, and now look set to exit going into another one. Despite all this, though, there is still good reason to be ebullient. Money may be tight but this can often be a very good time to start or ramp-up a business. There are always opportunities… and often more so in a downward economy.