It's Christmas Time Mr Taxman!

It's that time of year when staff parties abound, and you may be thinking of handing out small seasonal gifts to employees, customers or suppliers. Before you get too generous, make sure you know the tax implications.



Entertaining your staff is tax allowable as long as the entertaining is not part of an event aimed primarily at your customers. The cost of entertaining customers or potential customers or suppliers is not tax allowable for income tax or corporation tax. Your accounting records need to distinguish between the cost of hospitality such as the provision of food or drink, and significant gifts to customers, from your other marketing expenditure. The amount classified as non-allowable entertaining is added back to your profits to calculate the total tax due.


You can reclaim the VAT on the cost of entertaining your staff, but a proportion of the costs must be disallowed for VAT purposes where non-staff, such as family members, customers or suppliers also attend the event. However, where customers from overseas are present the VAT can be reclaimed on their portion of the costs. This is because the Tax Office recently removed the block on reclaiming VAT on entertaining overseas customers. Note the VAT block is only lifted for overseas customers, not suppliers, or UK customers, or other third-parties.


An event laid on free or below cost for employees would normally be a taxable benefit for those staff who attend, but it is tax free if it is designated as an 'annual event'. The other requirements are that the event is open to all staff and the cost does not exceed £150 per head, including VAT. If the cost exceeds this threshold, your employees will be taxed on the total cost of the event as a benefit in kind. You can pay this tax and NI on behalf of your employees using a payroll settlement agreement (PSA), which you need to agree with the Tax Office. So to avoid this hassle, keep the cost of the event, including all free transport and accommodation, below £150.01 per head.


Small seasonal gifts to staff, such as a bottle of plonk or a turkey, can be treated as 'trivial benefits'. These trivial benefits can be excluded from the report of benefits and expenses (form P11D) provided to staff, if you agree a dispensation for these gifts with the Tax Office. Don't push it with the Tax Inspector by trying to pass off expensive hampers or cases of champagne as trivial benefits.

More seasonal news here!

Tell the Taxman Now!

Did you know you could be landed with a penalty if you fail to tell the Taxman when you become liable to pay tax? For example, when you become self-employed, or make a large capital gain. The deadline for declaring that you have income tax or capital gains tax (CGT) chargeable relating to the year to 5 April 2010, is 5 October 2010.

If you miss that deadline, the Taxman may send you a failure to notify penalty, which can be up to 100% of the tax due. However, if you pay all the tax due on time, which for income tax and CGT relating to the 2009/10 tax year, is by 31 January 2011, the penalty can be reduced to nil.

Where you have already received a self-assessment tax return form to complete for 2009/10 or a notice to file a self-assessment tax return online, your obligation to tell the Taxman is satisfied when you submit your tax return on time. But if you haven't got a tax return form, you need to ask the Taxman to set you up in the self-assessment system before 5 October 2010. We can help you with registration.

Once you are registered with the Tax Office, you should receive either a Tax Return form or a letter from the Taxman asking you file a Tax Return online. The form or letter will include your Unique Taxpayer Reference number (UTR). If you submit a Tax Return that does not include your personal UTR number it may be rejected, and any tax payments you make will not be promptly matched to your records.

Mazuma win HSBC Start-up Stars Award!

We are delighted to announce that Mazuma have won the HSBC Start-up Stars 2010 award!

More than 250 leaders from the worlds of business, politics and the media gathered at the Dorchester Hotel on Monday 18th October 2010 for a glittering Gala Dinner to celebrate the 2010 HSBC Start-Up Stars Awards. The 2010 Start-Up Stars winners were announced on the night for the overall winner, the green award and the international award.

Head of business banking for HSBC, Huw Morgan, said: "Lucy and Sophie's story is a perfect demonstration of two entrepreneurs with a great idea, who then carried it through to create an impressive brand



From left to right: Dodo Juice (HSBC Green Award winner 2010), Mazuma (HSBC Start-Up Star 2010), Veritas (HSBC International Award winner 2010)

Business Secretary Vince Cable praised the 16 finalists competing for the top honours, saying: "The very best of British enterprise is represented at the HSBC Start-Up Stars Awards."

He added: "With the economy still facing significant problems and the state no longer able to spend its way to recovery we are more reliant than ever on enterprise and business to provide real growth and jobs for our economy. The dynamism, innovation and hard work of these SMEs will help drive Britain's economic recovery now and for the future and will demonstrate yet again that the UK is open for business."

We'd like to say a big thank you to all of our staff and clients across the UK who have helped make Mazuma what it is today, we wouldn't be where we are without you!

PAYE 'Errors'

You have no doubt heard on the news about the PAYE 'errors' affecting millions of people this autumn. The underlying problem is not new - the PAYE system does not cope well with taxpayers who have income from more than one employment or pension during the year. Under or overpayments of tax arise, and when the Taxman gets round to reconciling the tax and allowances due on the two or more employments, he issues a tax computation (form P800) to the taxpayer.

Unfortunately the Taxman did not do his reconciliations for 2008/09 (and in many circumstances for earlier years), so there are now two years worth of forms P800 (2008/09 and 2009/10) on their way to up to 4.7 million taxpayers.

It is going to take some weeks to issue all those forms, so you may not receive a letter immediately, if at all. If you normally complete a self-assessment tax return form you should not receive a form P800 as all your tax liabilities are reconciled on the self-assessment form.

If you do receive a form P800, don't panic. In most cases it will show a repayment of tax, which will be sent to you within a few weeks. You do not have to supply any further details to the Taxman to get this repayment. To avoid fraudulent scams, PLEASE DO NOT respond to emails or telephone calls asking for your bank details in connection with a tax repayment.

If the form P800 shows that you owe some tax, you won't have to pay anything immediately. Indeed, if you owe less than £300 in total for 2008/09 and 2009/10 that tax will be written off and you won't have anything to pay. If the tax due is less than £2,000 it will be collected through your 2011/12 PAYE, so the amount will be deducted from your monthly salary in the year to 6 April 2012. If the tax due is more than £2,000 the Tax Office will issue a separate payment request, and ask for payments to be made in 2011. However, if you will have difficulty in paying the amount due, whether this is more or less than £2000, you can ask to pay over an extended period of up to three years.

There is a possibility that you could avoid paying the tax due, where you can prove that the Taxman ignored information relating to your tax affairs for more than 12 months after the end of the tax year. This procedure is called Extra Statutory Concession A19, and you need to make a claim for this to apply.

National Minimum Wage Changes

In the current recession you may have been forced to freeze or even reduce wages. If your workers are low paid you must be careful that you continue to pay at least the national minimum wage rate (NMW).

The hourly NMW rates increased on 1 October 2010 and now apply to workers in the following age bands:

21 and over: £5.93
18-20: £4.92
16 and 17: £3.64
Apprentice rate: £2.50

The apprentice rate applies to apprentices aged under 19, or those aged 19 or more in the first year of their apprenticeship.

The Taxman can impose penalties of up to £5,000 if you do not pay the statutory NMW rate, and you may even be tried in the Crown Court for non-compliance with the NMW rate regulations, leading to an unlimited fine. You must also pay any arrears of wages owed (for the previous 6 years), based on the current NMW rate, not the rate in force when your employee was underpaid.

VAT Rates and Refunds

VAT can be very complicated at times! Most goods and services carry VAT at the standard rate, which is currently 17.5% and is due to increase to 20% on 4 January 2011. However, some transactions, such as financial services, are exempt from VAT, and some goods, such as children's clothes, carry VAT at 0%.

To confuse matters even more, certain services can carry VAT at 5%, or 17.5% or 0%, depending on the circumstances. For example, renovating a house that has been empty for at least two years can carry VAT at 5%, but repairing a roof on another building will generally require VAT to be charged at 17.5%, unless the building has 'listed' status when the work may be zero rated if it is an approved alteration.

If you find you have charged VAT at too high a rate to your customer you should refund the excess VAT charged, if this is practical and possible. You also need to correct your VAT returns for the excess VAT paid over to the VAT office. You can only make a claim for overpaid VAT for VAT periods ending in the last four years, so don't delay if you find an error that covers several periods.

Maximum NI Contributions

Before the General Election NI was referred to as a 'tax on jobs', and essentially it is a tax, as once you have sufficient NI contributions to qualify for state benefits any extra payments will not entitle you to further benefits.

If you have paid in excess of the maximum NI contributions required for the tax year you can reclaim the excess amount. The PAYE system will normally ensure that you will not pay more than the annual maximum on your regular employment. However, if you have two or more concurrent employments in the tax year, or you are employed and self-employed at the same time, you may pay more NI in the year than the annual maximum.

Each taxpayer has their own annual maximum figure based on their individual earnings. The annual maximum NI for employees will be at least £4,279 and for taxpayers who are both employed and self employed the annual maximum is at least £3,180. However, you need to add to those figures the amount of NI payable at the additional rate (currently 1%), which cannot be reclaimed.

If you believe you have paid more NI than your personal annual maximum you can reclaim the excess by writing to the NI Office in Newcastle upon Tyne. You don't have to calculate the amount of NI repayment due, as the NI Office will do this for you. But you must provide evidence of your earnings during the tax year, such as P60 forms or accounts.

There is no time limit for reclaiming overpaid NI contributions, so you can submit claims for all past years where a repayment is due.

If you are likely to overpay NI for the current tax year you can apply to defer the NI charges on one of your jobs. Do this by completing form CA 72A for employees, or form CA 72B if you are also self-employed. It is not too late to submit either application.

Cycle to Work Scheme Update

The cycle to work scheme allows employers to lend cycles to their employees tax-free, and in some cases the employees can purchase the cycle at the end of the loan period. However, the Taxman is looking carefully at abuses of this scheme...

- Some employers treat the loan of the cycle to employee as part of the employee's salary and reduce their cash wages proportionately. This is known as a salary sacrifice, and the arrangement must be agreed with the relevant employee in advance. If cycles are only provided to employees under salary sacrifice arrangements the whole cycle to work scheme may lose its tax exemption, as some employees cannot have their cash pay reduced due the National Minimum Wage rate rules.

- It is quite common for the employee to purchase the cycle from the employer at the end of the loan period. However, the Taxman says that where there is an automatic transfer of the cycle to the employee at the end of the loan period, the tax exemption for the cycle to work scheme is also lost.

- The second problem with the transfer of the cycle to the employee is how to establish the market value of the cycle at that time. If the employee pays the employer less than the market value for the cycle the difference is treated as employment income subject to tax and NI. As a top of the range sporting cycle can cost several thousand, the second hand value can be quite significant!

The Tax Office have produced a table to help employers value second hand cycles here

Finally, remember to qualify as a tax free cycle, it should be used mainly by the employee for travelling to work and on work related business, although other personal use is permitted. An expensive touring cycle that is never used for work related journeys will not qualify for the tax exemption!

Like this tax tip? Then check out Mazuma's bookkeeping services and low cost, hassle-free accountancy services!

For the Record....

Life at Mazuma never fails to be dull, that's what I love so much about running a business. Whether we're ordering 6 foot purple envelopes or signing up record numbers of new customers it's always exciting here, amazing considering that we are dealing with tax and accounts on a day to day basis!

I've blogged before about the one thing in business life that really annoys me and I think it's time to do it again.

When Sophie and I started the business we planned for all the usual stuff; how we would get our clients, what our unique selling point was, what advertising budget would be and so on. However, the one thing that we never put into the business plan was the time and cost involved in merely defending our business.

Now I'm not talking about competitors in the traditional sense here. Everyone one knows that competition is par for the course in business and in fact, it keeps us all on our toes and makes us all raise our game, so it's generally a good thing. What I am talking about is defending your business from competitors who blatantly steal your ideas.

Perhaps it was a little naive to think that other Accountants would be trust worthy folk. After all, isn't that what the profession sells itself as? To be fair, the majority of them are, but I am completely astounded by the number of times we have had to deal with cases of copyright infringement and passing off in the last few years. 19 to be exact; all of which has been by other Accounting firms.

Surely if you start a business you want to be unique? You want to be remembered for being you, not a bad imitation of somebody else? If you're starting an Accountancy business then surely your integrity, honesty and trusted advisor status are the very things that you are selling as added value to your potential clients? How can you meet with a new client, saying how honest and professional you are when you have stolen copy from another Accountant's website?

Again, I have to put a bit of a disclaimer here; many of the companies that we have had to approach because they have infringed our copyright have stated that it was web designers or copywriters that are to blame for the embarrassing mistake and that they knew nothing of it. That in itself is slightly concerning. Shouldn't these web and copy writing professionals also know the legalities of copyright infringement?

I know that everyone does a bit of market research when you start a business and it's only natural to be inspired by another company's products and services, but don't just go and copy them! If you've got the balls to start your own business then you must at least have the balls to think up your own ideas! The copies of Mazuma's work have actually been astounding. We have seen a site that copied every single word and page from ours, in the same layout! When they were approached by us they were shocked that they had been discovered. I declined to mention that the www bit of their web address stood for "world wide web" and that, in putting their site up, presumably they wanted to be found by someone?

What is even more frustrating is that it seems that nothing we do to deter people from copying our work has any effect. We have highly visible copyright notices on our site that actually state the words "do not copy".

So I am writing this, on the world wide web, for everyone to see.

Warning
If you steal content from our site we will take legal action.
If you pretend to be us, or to be affiliated with us, we will take legal action.
If you infringe our intellectual property rights we will take legal action.

I really hope that is clear!

For those of you who are reading this and thinking that this is just another money-grabbing company trying to stop other small businesses making a dent in the market, then think again. Mazuma started from my spare bedroom. Sophie and I gave up good jobs and made significant sacrifices to get the business going and faced harsh criticism from many other members of the Accountancy profession for daring to buck the trend. We didn't borrow any money from banks, families or friends and we had no other means of supporting ourselves once Mazuma launched. Yes, we have had some success, but business is not plain sailing, we just choose to remain positive and focus on all the good rather than the bad.

If you're in any way offended by this then I'm not going to make any apology for defending my business. Why would I? Mazuma have worked hard to build what we have and it hasn't always been easy. We not only have our business to protect but we have the livelihoods of our staff to think about - staff who have mortgages, children and families of their own to provide for. They put their faith into Mazuma by agreeing to work for us and if we did anything less than staunchly defend our hard work then we wouldn't be very good employers would we?

I'm not trying to deter anyone from starting their own business. Running your own business is a hugely rewarding experience. All I am asking is that you play fair. Don't copy and paste text from another company's website and pass it off as your own and don't pretend to be anyone else thinking it will land you some business. The only thing it will land is a solicitors letter on your door mat and some hefty legal fees.

If after reading this you are still inclined to try and copy Mazuma's work, then a) I sincerely doubt your honesty and professional integrity, b) you have no excuse as I've made my feelings quite clear and finally c) you'll be hearing from our solicitors in due course.

Pay Staff Tax Free - Staff Suggestion Scheme

This scheme is specifically allowed and provided for in the legislation. It is very simple to operate and works as follows...

Employees can be rewarded for making suggestions that relate to your business activities, and the conditions apply, the payments can be made without tax or NI being payable. You get tax relief on the payment through your accounts, just as you do with paying normal salaries.

If a suggestion is implemented and a real financial benefit is expected to accrue, the employee can be paid the lower of:
half the annual benefit expected in the short or medium term, or
£5000.

Payments of up to £25 can be made for employees' suggestions as an encouragement, whether or not the suggestion is implemented. Employees can make as many suggestions as they want.

The suggestion must be outside the scope of the employees' normal duties, so a production employee or director could suggest a sales idea for example.
The suggestion must not be made in a meeting held for the purpose of proposing suggestions.

The scheme must be formally set up but no formal approval is needed from HM Revenue & Customs.

It must be open to all employees and not be part of their contractual pay or benefits entitlements.

For more useful tax tips and a hassle-free accountancy service, why not get a quote from Mazuma?

Thanks you to our clients!

Here at Mazuma our clients are the most important part of our business, so we just wanted to take the time to say....

Thank you for being our client!

It means so much to us that so many of you introduce your friends, family and business contacts to us that we wanted to give you a little extra reward in July and August (selected offices only).

If you introduce new clients to us that sign up during July and August we'll give you a little more for your efforts!



1 client = £25 of retail vouchers

2 clients = £75 of retail vouchers

3 clients = £100 of retail vouchers



So if you've passed our details to someone, it would be wise to give them a gentle reminder to sign up in July and August so that you get your extra vouchers! You can even introduce a new friend to us here!

Of course, you could always offer to give them some of the vouchers, or you could choose to keep them for yourself (it's okay, we won't tell them!).

Thank you once again for continuing to be a Mazuma client, we really appreciate it.

Kindest Regards,

Emergency Budget Newsletter

Welcome...

To our Emergency Budget newsletter.

This newsletter aims to summarise the main measures that affect our clients. If you need further assistance just let us know

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!


Summary

We all knew that Chancellor George Osborne was going to announce an increase in Capital Gains Tax (CGT) today, but we didn't expect the rate to rise immediately. Other surprises included reductions in the rates of corporation tax for both small and large companies and in the rates of capital allowances for all businesses.

A rise in the standard rate of VAT to 20% was widely expected, but this increase has been delayed until 4 January 2011, which is the first working day after the Christmas break.

The 1% point increase in NI rates from 6 April 2011 is already planned, but we are assured by George that through some manipulation of thresholds this increase will not be felt by most people. However, we won't know the exact starting points for employers and employees NI until the Autumn Budget statement on 20 October 2010.

Basic rate taxpayers aged under 65 will benefit from a £1,000 increase in their personal allowance from 6 April 2011. Those aged over 65 already receive a higher personal allowance, if their total income is below £28,930.

Individuals

Capital Gains Tax
The rate of CGT is to increase from 18% to 28% from 23 June 2010, but taxpayers with taxable income and gains below £37,400 will continue to pay CGT at 18%.

All trustees and personal representatives with any level of income and gains will also rise to 28% from 23 June 2010.

We thought the Government would not increase the rate of CGT in the middle of a tax year, as that would cause so many complications when calculating the tax due for 2010/11. However, that is exactly what George plans to do. The increase in CGT is not as high as many feared, as it is still well below the highest income tax rates of 40% and 50%. Although trusts are particularly badly hit as they will pay the higher rate of CGT on all gains and only have half the annual exemption of individuals. There are special rules for trusts for the disabled.

The annual exemption remains at £10,100 for individuals and £5,050 for most trusts.

All gains that qualify for entrepreneur's relief will continue to be taxed at 10%, whether the disposal is made before or after the changes on 23 June. There will be an increase from £2 million to £5 million in the lifetime limit on gains that can qualify for entrepreneurs' relief from 23 June 2010 and this is very welcome, but many gains will never qualify for that relief. For example, the sale of a commercial property, which is not associated with the disposal of a trading business, will not qualify for the relief. Letting of commercial property does not count as a trading business for entrepreneurs' relief.

If you are in the middle of arranging a large sale, you could escape the CGT rise if you have already exchanged contracts. This is because the disposal date for CGT is the date that unconditional contracts are exchanged, not the completion date for the deal. If the contract is conditional, the disposal date is the date those conditions are satisfied. The disposal date for a gift is the date the beneficial ownership passes.

Income Tax
The personal allowance for those under 65 will rise by £1,000 to £7,475 for 2011/12. However, this generous increase in tax free income will be limited to those who pay income tax at 20%, as the threshold at which 40% tax starts will be reduced to take into account the increased allowance. We won't know the exact tax thresholds until the Autumn Budget statement, as the increases in threshold for 2011/12 will be based on the RPI to September 2010.

Child Benefit and Tax Credits
Child benefit is available to all parents of children under 16, and is not means tested. This benefit will be frozen at current levels until April 2014, and the money saved will be transferred to child tax credits.

Working and Child Tax Credits are to be withdrawn gradually from families with total income of £40,000 or more from April 2011. The special baby rate will be withdrawn at the same time, but the child element for less well-off families will increase by £150. There are a number of other changes planned for later years including a reduction in the period for which claims can be back-dated.

Child Trust Fund
Child Trust funds are special tax free savings accounts that are set up with Government funds for children born after 31 August 2002. Additional savings of up to £1,200 per year can be contributed to each account by anyone. Reductions in the funding for these accounts will be made from August 2010 and no further funding will be provided for new accounts from 1 January 2011. The accounts that are already open will remain in place until the child reaches age 18.

Retirement and Pensions
The state pension age (SPA), from which individuals can receive the state pension, is currently 65 for men and is rising to 65 for women. Legislation is already in place to increase the SPA to age 66 for everyone from 2026, but the Government wishes to bring this date forward.

From April 2011 the state pension will be increased by the greater of: the annual increase in earnings or prices, or 2.5%. The standard minimum income guarantee given under the Pension Credit will be increased by the same amount as the state pension.

When a member of a money purchase pension scheme reaches age 75 they are required to purchase an annuity to provide their future pension, or heavy charges can apply. This requirement to purchase annuity at age 75 is to be scrapped from April 2011. In the meantime if the scheme member has not reached age 75 by 22 June 2010, they can defer purchasing an annuity until age 77.

Tax relief for pension contributions is expected to be limited to around £35,000 per year per person from April 2011. This cap will replace the complex tapering of tax relief that was due to apply to individuals with total income of £180,000 or more.

Currently employees can be required to retire when they reach the default retirement age of 65. The Government is going to consult on how to remove this default retirement age.

Furnished Holiday Lettings
The changes that were announced by the previous Government will not be taking effect, although new measures will be considered to ensure the rules apply equally to properties in the EEA as well as increasing the number of days that properties have to be available for let and actually let as commercial holiday lets.

Businesses

Corporation Tax
The small profits rate of corporation tax will be cut from 21% to 20% from 1 April 2011, when it was previously expected to increase to 22%. The small profits rate applies to profits of up to £300,000 if there are no associated companies. The corporation tax rates for large companies will reduce from 28% to 27% from next April and then fall by 1% per year eventually down to 24%.

Capital Allowances
The previous Government was always messing with capital allowances in an attempt to incentivise businesses to invest in this or that type of equipment. The new policy is to cut back on capital allowances with effect from 1 April 2012.

The main pool rate is reducing from 20% to 18% from that date and the special pool rate from 10% to 8%. The Annual Investment Allowance (AIA) Limit is also reducing from £100,000 to £25,000 from 1 April 2012.

Small businesses will not be affected if all of their expenditure on equipment is within the annual investment allowance, which gives 100% deduction for costs in the year of purchase. Unfortunately expenditure on cars cannot be covered by the AIA. However, expenditure on new (not second-hand) low emissions cars and vans can be covered by a separate 100% allowance.

NIC
2011/12
Although we know the rates of NI that will apply from 6 April 2011, (2010/11 rates + 1%), we don't know the new thresholds, so we cannot construct a meaningful table for 2011/12. We know the employer's secondary threshold for class 1 NICs will increase by £21 per week above the RPI increase. The RPI increase is based on the RPI to September 2010. We will provide a full NIC rates and thresholds table when we have the full details in October.

NIC Holiday
The Treasury are feeling guilty about cutting loads of public sector jobs in the less prosperous regions of the UK, so they have come up with the idea of an 'NICs holiday'. A business will be exempt from paying the employer's class 1 NICs for 12 months for up to 10 employees, capped at £5,000 per employee.

This scheme will start in September 2010 but will apply to new businesses set up on and after 22 June 2010. It will only apply in Scotland, Wales, Northern Ireland, the North of England, Yorkshire, the Midlands and the South West regions. Certain businesses are excluded, such as those under the IR35 or Managed Service Company rules, and businesses in grant-supported sectors such as agriculture, fisheries and coal. More details are expected to be made available shortly.

VAT

Change of Standard Rate
The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. Goods and services that are currently exempt from VAT or are subject to VAT at the zero, or 5% rates will not be affected by this change.

If you are planning to invoice or pay in advance to avoid the VAT rise, think again. There will be a special 2.5% VAT charge on such advance sales where the customer cannot recover all the VAT on the supply, and one or more of the following applies:

- the supplier and customer are connected,
- the supplier funds the purchase,
- the payment is not due for at least six months;
- the value of the supply is £100,000 or more, unless the prepayment or advance invoice is normal commercial practice.

Flat Rate Scheme
Small businesses can start to use the flat rate scheme if their VAT exclusive turnover is no more than £150,000, but must leave the scheme if their VAT inclusive turnover exceeds £225,000. This exit turnover figure will rise to £230,000 on 4 January 2011.

The flat rates that are applied to gross sales under the flat rate scheme will increase on 4 January 2011 to reflect the increase in the standard rate of VAT. If your business will no longer benefit from using the flat rate scheme you can leave scheme at any time.

Payments on Account
Businesses who have annual VAT due of £2 million or more must make monthly VAT payments on account. This threshold will be increased in 2011.

Tax Avoidance

A corporate tax avoidance schemes has been blocked from 22 June 2010 that uses financial instruments to remove profits from UK tax or is used to create an artificial tax credit.

The Government is to consider whether a General Anti-Avoidance Rule would be effective in reducing tax avoidance. It will also examine the following anti-avoidance measures:

- Expand the disclosure of tax avoidance schemes regime to include schemes involving IHT on trusts.
- Block the manipulation of consortium relief.
- Restrict the use of employee trusts, including employer finance retirement benefit schemes (EFRBS).
- Amend Stamp Duty Land Tax due on high value property transactions.

Other Duties

- Landline duty of £6 per year will not go ahead from 1 October 2010.
- Alcoholic duties rates on strong cider will reduce from 30 June 2010, back to the levels which were in place before the March 2010 Budget.
- A bank levy on bank's balance sheet values will be introduced from 1 January 2011 at 0.04% , which will rise to 0.07%.



Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Mazuma to Adjudicate Miss Wales 2010

South Wales based Accountancy firm Mazuma have been named as the official adjudicators for Miss Wales 2010.

Lucy Cohen (Commercial Director) and Sophie Hughes (Operations Director) will be adjudicating the event being held in Cardiff on 26th June 2010, culminating in the finals that evening in St David's Hall.

"We are delighted to have been chosen to take the official adjudicators role at such a prestigious event" says Sophie Hughes, "It's a privilege and an honour and we are thrilled to be part of something that raises so much money for good causes like The Joshua Foundation".

The Miss Wales competition has been organised by Vibe since 2004. It has grown to become more popular than ever with around 1,000 women registering an interest in entering the competition each year.

The competition final is held annually in Cardiff and is sold out within days of tickets going on sale. The winner is automatically guaranteed a place at the most respected and established contest in the world - Miss World.

Lucy Cohen says "Running a firm of Accountants, it's not often that we get to attend, let alone participate in events like Miss Wales. It is great to know that once again Mazuma are smashing the Accountancy stereotype and showing that Accountants are important, even in the more glamorous parts of life that they might not naturally be associated with!"

The media interest in the competition is phenomenal. Each year, it features in the local, regional, national and specialist press and media. Vibe has also won a number of awards from the Chartered Institute of Public Relations for the press and publicity surrounding the Miss Wales event.

For more information on Miss Wales you can visit the website here.

To find out more about The Joshua Foundation you can visit the website here.

Too good to be true?

Things that sound too good to be true usually are and lots of companies make claims about their services, their prices and how unique they are!

We know that our services are second to none, but here are a handful of testimonials from our clients so that you don’t just have to take our word for it!!

"If you enjoy preparing returns for your accountant (wading through order books and invoices and all those fiddly receipts) then trust me, the last thing you should ever do is switch to Mazuma. They'll take it all off your hands in a funky purple envelope and you'll have to find a new hobby like Scottish country dancing or basket weaving. On the other hand, if your accounts are just one gigantic hassle, give them a call. I did 3 years ago, and life has been much, much easier since."
James Daniel
Copywriter, EarthMonkey

“I signed up with Mazuma after hearing about them nearly 2 years ago. Personally I couldn't recommend them highly enough. They combine professionalism with a sense of personality, dealing with queries & issues quickly in a friendly manner. Having been a sole trader for 2 years the business went limited in January and Mazuma have helped enormously in making that transfer as smooth as possible. They've really given us a level of service we didn't expect, and we see our relationship with them as a long lasting one...”Ben Smith
Gingenious

"For people who work in TV time is too precious to be taken up with paperwork. All my team use Mazuma's services for the same reason I do... Mazuma's Purpleforce scheme is efficient, low cost and hassle-free."
Mark Hutchings
Gaffer (Dr Who, Torchwood, Sarah Jane Adventures)

Still not sure if Mazuma is quite right for you?

Why not give us a call on 0845 310 5654?

Or get a quote online

Tax Changes Ahead

Welcome...

To June's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner,

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help

Changes in Capital Gains Tax

The Coalition Programme for Government, published on 20 May 2010 contains this pledge:

We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.

This strongly hints at an increase in the rate of Capital Gains Tax (CGT) due on gains arising from non-business assets. The easiest way to do this would be to increase the rate of CGT for all assets and provide tax relief to reduce the effective rate of CGT for selected business assets, or for assets used for 'entrepreneurial activities'. This could mean increasing the scope of existing tax reliefs such as entrepreneurs' relief, or roll-over relief on business assets.

We do not expect the rate of CGT to change before 6 April 2011, however some commentators think a change could be introduced from the next Budget on 22 June. It would be very complicated for the Taxman to programme his computers to calculate CGT at two different rates for the same taxpayer within one tax year. It is also extremely unlikely that a rise in CGT would be imposed retrospectively back to 6 April 2010. Between 6 April 1988 and 5 April 2008 CGT was charged at the taxpayer's marginal income tax rate, and this seems to be the solution the Government is leaning towards.

So what should you do before 6 April 2011 (or 22 June 2010 if ultra cautious), to avoid paying more tax? If the asset you plan to sell cannot be regarded as a business asset - for example a holiday cottage that does not qualify for furnished holiday lettings, then we should discuss the implications of making a disposal now rather than later. Remember a disposal need not be an outright sale, a transfer to a trust would give rise to CGT, but possibly also inheritance tax. If you make the disposal before 6 April 2011 rather than afterwards, the payment date for CGT is brought forward one year, and this needs to be balanced with the apparent tax saving.

It is not clear how far the 'generous exemptions' for business activities will stretch. If you currently qualify for entrepreneurs' relief as you have been a business partner, sole trader, or shareholder and employee holding 5% or more of the voting shares, for at least a year, it is probably reasonable to assume the assets connected with your business will continue to qualify for that tax relief. If you don't fall into any of those categories, you should talk to us about the risk of increased CGT, bearing in mind the level of the expected gain.

You also need to look at your projected total income for 2011/12, and the likelihood that the gain will be covered by your annual exemption for CGT. This exemption is currently £10,100 per person for 2010/11, but this could be cut back to perhaps half that amount!

The CGT changes discussed above are currently all speculation so please talk to us if you are concerned at all. We expect some definite changes to be announced in the Budget Statement on 22 June 2010. Look out for our Budget newsletter when we will explain the Budget announcements relevant to small businesses and individuals.

Other Tax Changes Ahead

The Coalition Programme for Government also contains a number of other proposed tax and law changes that may impact on you or your business if they come to pass.

The business-focused proposals include:

- Review of the IR35 rules as part of a review of all small business taxation.

- Refocus R&D tax credits on hi-tech companies, small firms and new businesses.

- Review the taxation of furnished holiday lettings so UK businesses are not penalised.

- Encourage farmers to convert existing buildings into affordable housing.

- Increase the threshold from which employer's NI is payable by £21 per week, to £6,812 a year from 6 April 2011. The employees' NI thresholds will not rise, so employees and the self-employed will bear the full brunt of the 1% increase in all NI rates.

- Provide those out of work with business mentors and start-up loans to help them start their own businesses.

The proposals affecting individuals include:

- No reduction in the imposition of Inheritance Tax in the foreseeable future.

- No reduction in Income Tax rates until the Budget deficit has been reduced.

- Increase the personal allowance significantly from 6 April 2011, but reduce the benefit of this allowance for those with high incomes. The personal allowance is currently tapered away for those with total income over £100,000, so this threshold may be lowered.

- Introduce a transferable married couples allowance, but only for basic rate taxpayers.

- Review of the taxation of individuals who are not domiciled in the UK, but who have a connection to the UK so they have some UK tax obligations.

- End Government funding of Child Trust Funds from 1 January 2011, and reduce the value of vouchers given for new-borns from 1 August 2010.

- Reform the administration of Working and Child Tax Credits to reduce fraud and overpayments.

- Reduce the penalty for living as a couple in the Working and Child Tax Credits system.

- Review the effectiveness of raising the Stamp Duty threshold for first-time purchasers.

- Remove the requirement to purchase a pension annuity at age 75.

- Phase out the default retirement age of 65.

- Bring forward the increase in the State Pension Age (SPA), which is the age from which you can draw the State Pension. This will be 66 years for men from 2016 and 66 years for women from 2020. The SPA has already increased beyond 60 for women, and is set to rise gradually to 68 for everyone by 2046.

We expect more detail on these proposals to be announced in the Budget on 22 June.

Post Credibility Team

This is the new name for the VAT investigations unit! This new unit is sending out computer-generated letters to businesses who have claimed a refund for the last VAT period or periods. The letters are very poorly worded and may well be confusing on first reading. However, what the VATman is trying to say is that he wants an explanation of the refund claim. He is not accusing you of doing anything wrong.

If you receive a letter from the Post Credibility Team please deal with it or send it on to us ASAP. If you ignore it you will start to receive annoying phone-calls from the VAT office.

PAYE Codes for 2010/11

We have heard that the Taxman has almost finished sorting out the mess his new computer made out of the 2010/11 PAYE codes. If you have not received a P2 form for your employees that gives their PAYE code for 2010/11, carry on using the PAYE code issued for 2009/10. You should shortly receive the updated P2 forms for 2010/11.

One of the problems with the PAYE codes occurs where an individual starts to receive an occupational pension, or that pension is paid by a different pension provider, perhaps due to a restructuring of companies.

In such cases the pension provider should send a form P46(pen) to the Tax Office. However, the Taxman has said that many of these P46 (pen) forms contain mistakes, and this is causing the PAYE computer to churn out crazy codes, or send out unnecessary forms P161 to the pensioner. If you need to tell the Tax Office that you have started paying a pension to a former employee, please ask us to check the P46(pen) form first.

June Question and Answer Corner

Q. My UK based company has bought additional bandwidth from an internet provider based in the USA. How do I treat this purchase for VAT purposes in the UK?

A. The supply of bandwidth as part of your internet service is an international service for VAT purposes, as the supplier is based outside the UK. As your company is VAT registered you must apply the reverse charge rules to this purchase. This means for VAT purposes you treat the transaction as if you were both the purchaser and the supplier. You charge yourself standard rate VAT on the invoiced cost and claim that VAT back as part of your input VAT for the quarter. The VAT added appears twice in the calculations for your VAT return; as input VAT on purchases and as output VAT on the reverse charge as if the purchase was one of your own sales.

Q. My sales force all need to connect to the internet while they are out on the road, so we provide them each with a mobile phone dongle to provide the internet where and when they need it. Are there any tax implications for my company or the employees?

A. A mobile phone dongle is treated as a piece of computer equipment and not as a mobile phone. Where the company purchases the dongle and pays the subscription charge directly there should be no benefit in kind charge on the employee. This applies if the associated computer has no significant private use, and the private use does not affect the cost of providing the equipment.

Where the employee purchases the dongle and pays the connection charge, which he claims back from the company, the tax situation is more complicated. The employer needs to include the expense paid on the form P11D, and the employee needs to claim a deduction for the costs on his tax return, as reasonable additional costs relating to work. To circumvent this paper chase, the company should apply for the costs of the dongles to be included in a P11D dispensation.

Q. On 1 Feb 2010 I started a self-employed consultancy business, which has generated profits of about £40,000 in the first four months. I also run my own company and let a few properties. The income from my company and the rents has been much lower in 2009/10 compared to the previous year. Do I have to take into account the income from my new consultancy business when I make my payment on account for 2009/10 due on 31 July 2010?

A. You do need to take into account the income from your new consultancy business when making your next payment on account for income tax. However, the opening year rules for self-employment will apply, so only two months of your first period of the consultancy business profits are taxed in 2009/10. You can apply to reduce the 2009/10 payment on account if your total taxable income for the 2009/10 tax year, including the two months of consultancy profits, has dropped below the total taxable income for 2008/09. It doesn't matter if your income for 2010/11 rises again.

June Key Tax Dates

19/22 PAYE/NIC, student loan and CIS deductions due for month to 5/6/2010.

22 New Coalition Government first Budget.

30 Deadline for UK businesses to reclaim EC VAT chargeable in 2009.


Much More from Mr P!




Well, can you believe that it's June already? The months just seem to fly by nowadays! Those of you who are current clients may have recently received a letter regarding your self assessment tax return. We'll have had most of the information on this already if you've been using our Purpleforce service, but just in case you've missed anything out, it's an opportunity to let us know. If you've been super organised all year and haven't forgotten anything then you can happily ignore the letter!

I want to thank all of our clients for continuing to spread the word about Mazuma. We've had record numbers of client referrals in the last month. To make it even easier to refer your friends to us we have put a Refer A Friend section on the website. Don't forget that for every friend refer who signs up, you'll get £25 of retail vouchers as a thank you!

Finally, if you are referring someone to us, or thinking about moving to Mazuma yourself then why not try us our for free? We know that changing your Accountant or getting one for the first time can be a difficult decision, so why not try us out so you can see exactly how good our service is! All you have to do is get a quote online using the promo code FREE, or email sales@mazumamoney with the subject of the email as FREE and give us your name and address and we'll get your trial pack out to you, simple!





Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Is One on One always best?

Nowadays companies are clambering all over themselves to shout about their great customer service, the fact that their customers are not just a number, that nobody is just a "sausage in a sausage factory". From personal experience I can't stand it when I call up a company and nobody knows who I am or has any record of me having called before. This is especially frustrating when you pay them good money!

Lots of banks have jumped onto the "personal relationship manager" band wagon - you can have their mobile phone number, their direct line, their home address and their credit card for emergencies (alright, I made the last couple up but you get the gist). The thing is, the mobile number is a work mobile and will be switched off at 5pm sharp and their direct dial will be picked up by their voicemail because they are off meeting the other 150 customers with whom they have a "personal relationship". Very useful!

Now don't get me wrong, I am a great believer in customer service as a number one priorty, but has nobody noticed that in their efforts to achieve a "personal relationship" they are actually alienating a large part of their client base who, for the most part, just want a quick answer when they have a question.

When we were looking at our customer service model for Mazuma it quickly became apparent that having a single point of contact just wasn't a good idea. It's vitally important that people have access to someone who can answer technical questions about their accounts when they need it. But does this mean that it should always be the same person?

My personal opinion is that, no, it shouldn't have to be. At Mazuma, in each of our teams we have 2 or 3 people who know each client's work inside out. This is for a few reasons (which I won't bore you with now), but in terms of customer service, it's so that you'll always have someone to talk to, even if the team manager is on holiday for two weeks, or unexpectedly off sick, or on maternity or paternity leave. Not only does this mean that you have the reassurance that three qualified staff are looking at your work regularly (a sort of accountancy quality control if you will...), but it also means that you can count on there being someone to help you out when you need it. Marvellous!

Of course, not everybody likes this idea, but I regularly put this question to those people when challenged on this set up:

"So if your requested single point of contact was on annual leave for two weeks, would you happily wait two weeks for your question to be answered?"

In 100% of cases the answer is a resounding "No!".

A single point of contact is not a stable customer service model, but small teams who know your story in depth are.

I rest my case!

Mazuma Speak at Women In Business 2010

Mazuma's Commercial Director Lucy Cohen will be speaking at the Women In Business 2010 conference on 10th June.

Located at The Hilton Cobham, Surrey, Women In Business are bringing together some of the most well respected and inspirational business experts for the first annual Women In Business conference.

Event highlights include:

• Keynote speaker - Penny Power
• Two seminar programmes - addressing a diverse range of highly relevant subjects
• Informal insight slots - topline views of hot topics
• Exhibition - meet potential suppliers and service providers
• Panel of experts - they've been there, so here's the chance to ask their advice
• Speed networking - maximise the opportunity of meeting potential clients
• Informal networking opportunities - relaxed and easygoing, over a glass of wine

It is an opportunity to meet with equally passionate businesswomen to find inspiration, support and discover new opportunities all under one roof, for one day.

If you want to build, grow or celebrate your business Women In Business 2010 is the place to be.

Be involved. Be informed. Be inspired.

Find out more about the event here.

The New Face of Mazuma

Accountancy practice Mazuma finally reveal the real face behind their success. It’s a mysterious Purple Envelope who goes by the name of Mr P!



Mazuma has always been famed for their Purple Envelopes and the relief that they bring to small businesses through their award winning Purpleforce service. The Purpleforce service allows small businesses to simply put everything into one of Mazuma’s trademark purple envelopes every month, post it in and let Mazuma do the rest. Prices are fixed fee and taken monthly by direct debit and the monthly payment will include all the services necessary for the business including all year end activities such as submitting tax returns to HMRC or filing company accounts with Companies House.

Whilst Lucy Cohen (Commercial Director) and Sophie Hughes (Operations Director) have always publicly been the face of Mazuma, it would now seem that the mysterious Mr P is behind the whole operation.

Lucy Cohen says “It was about time we publicly introduced Mr P to the world and give him a name, rather than him being an anonymous envelope. Mr P has been with Mazuma from day one and if you ever asked him he’d tell you he’s the real brains behind the operation (although we know he’s just an envelope!).”

He has, however, been instrumental in shaking up the accountancy industry and forcing less forthcoming accountancy practices to focus on customer service, just like Mazuma do.

“It’s made him very popular with Mazuma and our clients, but a little less popular with some more traditional accountants, which is why he’s hidden his light under a bushel until now!” says Lucy Cohen.

So is this just a gimmicky marketing ploy? “Of course not!” says Sophie Hughes. “Although we’ve never publicly named our chief purple envelope before, the fact is that they form an integral part of our business model and it was time that we really celebrated that.”

It looks like Mr P is starting to make quite a name for himself. He’s regularly tweeting on Twitter, he’s got his own blog and it would seem that he’s more than a little bit mischievous!

“Accountancy is something that is important and serious, but there are real people with real lives behind the bookkeeping and tax returns” says Lucy Cohen.

“Mr P is our way of recognising that and injecting a little bit of fun into an otherwise dry industry, which is what we’ve always tried to do at Mazuma. Plain English accountancy is the way forward, and yes, we do see the irony of making a service seem more human by having an envelope as a character!”

Mr P will be making a regular appearance in newsletters, on the Mazuma website and across the UK over the coming months. “Look out for him” says Lucy Cohen, “he might just have something interesting to say!”

May's Tax Tips & News

Welcome...


To May's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Don't forget, you'll get £25 of retial vouchers if you refer a friend to us and they sign up! Refer a Friend here!

Furnished Holiday Lettings Saved!

For the last 12 months we have been warning you that the favourable tax concessions for furnished holiday lettings (FHL), would end on 6 April 2010.

The legislation to change these tax rules was included in the 2010 Finance Bill. However, as part of the horse-trading at the end of Parliament before the General Election, the repeal of the FHL rules was dropped from the Finance Bill before it became the 2010 Finance Act on 8 April 2010.

The FHL rules remain in place for the time being. If Labour regain power on 6 May 2010, the FHL rules could be abolished, possibly from 6 April 2010. However, if it is someone else that draws support from rural areas who gains control on 6 May, it is less likely that the FHL rules will be abolished in the foreseeable future.

The FHL rules can be used by any individual, partnership or company who lets property located anywhere in the UK or in any EEA member state.

The property must also comply with all of the following conditions:

- It is let out as furnished holiday accommodation for at least 70 days a year;

- It is available for commercial letting for at least 140 days per year; and

- It is not let for a continuous period of more than 31 days to the same tenant in seven months of the year, and those seven months include the periods in which it is actually let as holiday accommodation. Those seven months do not have to be a continuous period.

'Holiday accommodation' means letting to the general public for periods which do not normally exceed a month, but this can include letting to business people for short periods as well as to tourists.

If the property qualifies under the FHL rules the letting business is treated as a trade for most income tax and capital gains tax reliefs. This means the following tax advantages apply:

- Losses from the FHL business can be set against other income of the same year.

- The FHL income qualifies as earnings for pension contributions.

- Any capital gain made on the disposal of a FHL property can be:

- reduced by entrepreneurs' relief; or

- deferred by purchasing another FHL property or a different business asset; or

- deferred if the FHL property is given away or sold at below market value.



The FHL property may also be exempt from inheritance tax if the owner takes an active part in the FHL business.

New Penalties for Late PAYE

From this current tax year the Taxman can impose penalties if you are late in paying over the payroll and CIS deductions you make in the tax year. 'Late' in this context means the payment reaches the Tax Office after the 19th of each month, (or 22nd when paying electronically).

Until now the Taxman did not impose penalties or interest on small employers if all the payroll deductions for the year reached him by 19th April (or 22nd) after the end of the tax year. Large employers (those with more than 250 employees) have been subject to surcharges for late payment for some years, as they have been obliged to pay over all deductions electronically.

Those surcharges for large employers have been scrapped and all employers are now subject to the same penalties. However, small employers do not have to pay over their deductions electronically.

The penalty will be based on the total amount of deductions paid late for the tax year and will be calculated based on the number of times payments are late in a tax year as follows ...

- Late once - no penalty
- Late 2 to 4 times - 1% penalty
- Late 5 to 7 times - 2% penalty
- Late 8 to 10 times - 3% penalty
- Late 11 or more times - 4% penalty

The penalty applies to the total amount that is late in the tax year (ignoring the first late payment in that tax year).

If any payment is made more than six months late a further 5% charge is added to the above penalties. Where the payment is over 12 months late another 5% penalty charge is added.

However, these penalties cannot be imposed automatically as at present the Taxman does not know how much PAYE etc you should be paying over month on month. Although, when the Taxman inspects your PAYE records and it is apparent that you been late in paying over your payroll deductions, he has every right to impose these heavy penalties for late payment.

Commercial Property Lettings

Normally a loss arising from letting of commercial or residential property, can only be carried forward to set against profits from that same property business, (see above for different treatment for losses from furnished holiday lettings). However, where part of the loss has been generated by the deduction of capital allowances, that part of the loss is available to set against the owner's other income in the same tax year.

A capital allowance generated loss is very unlikely to arise in connection with letting residential property as capital allowances cannot be claimed for equipment used in residential properties, but such allowances can be claimed for equipment or integral features used in or attached to commercial properties. Improvements to commercial properties made since 6 April 2008, such as new lighting or air-conditioning systems are classified as integral features, and thus qualify for capital allowances.

All integral features and other plant and equipment that qualify for capital allowances can fall within the Annual Investment Allowance (AIA), which gives a 100% deduction in the year the cost is incurred. The AIA is capped at £50,000 per year for expenditure incurred before 6 April 2010, but that cap is doubled for expenditure incurred on or after that date. The capital allowance generated loss from a let commercial property could be considerable where there has been high expenditure on items that qualify as plant, machinery or integral features.

Do be aware that losses made after 24 March 2010 may be barred from being set-off against other income if there was a plan in place to deliberately avoid tax by generating those losses.

New VAT Partial Exemption Rules

Some VAT registered businesses make sales that are exempt from VAT as well as sales that are subject to VAT at the standard, lower or zero rate. For example, estate agents receive commission on selling houses (VAT at standard rate), and commission on selling financial products (exempt from VAT). Such businesses are referred to as partially exempt as they can only reclaim the VAT on that part of their purchases (input VAT) which relates to the VAT-bearing sales.

Working out how much VAT such a partially exempt business can reclaim can be complex, particularly if the VAT-exempt sales are a small part of the whole business. In this case the VATman does allow the business to reclaim all of their input VAT if it can pass one of three tests (called the de-minimis tests). Before 1 April 2010 there was only one test:

The input VAT relating to exempt sales is less than:

- £625 per month on average; and
- 50% of the total input tax.

For VAT periods starting on and after 1 April 2010 there are two additional optional tests. If the business can answer 'yes' to both parts of either test 1 or test 2, the business passes the de-minimis test, and can reclaim all its VAT for the quarter. However, it must also check the figures for the full year.

Test 1

- Is the total input tax less than £625 per month on average; and
- Is the exempt income less than 50% of the total sales?

Test 2

- Is the total input VAT less input VAT directly attributable to VATable sales less than £625 per month on average; and
- Is the exempt income less than 50% of the total sales?

Once the business has passed the de-minimis test for a year, the VATman will assume the business will pass the test for the next year, so it can reclaim all its VAT for coming quarters. However, at the end of the year it must check it has passed the de-minimis test for the full year.

Please contact us for advice in this complex area.

May Question and Answer Corner

Q. I recently sold my 60% share in a trading company that I've been a director of for over 20 years. The sale included ordinary shares that had full voting rights, and preference shares, which had no voting or conversion rights, just the right to a fixed dividend. Can I claim entrepreneurs' relief on the gain arising on both types of shares or just in respect of the gain on the ordinary shares?

A. As you held at least 5% of the ordinary voting shares and were a director of the company for one year up to the date of sale, entrepreneurs' relief should apply. Although the conditions for entrepreneurs' relief refer to ordinary voting shares, the gains arising on both the ordinary shares and preference shares can be included in your claim for entrepreneurs' relief. If the sale was concluded on or after 6 April 2010 the maximum gain that can be covered by entrepreneurs' relief is £2 million, for sales before this date the maximum gain that can be subject to an entrepreneurs' relief claim is £1 million.

Q. My business is an agency that provides rented holiday accommodation to UK holiday-makers. My commissions are less than the VAT registration threshold, so I am not VAT registered. What contracts and invoices do I need to put in place to avoid charging VAT to either my clients (the landlords) or to the holiday-makers who rent the properties?

A. You want to stay under the VAT threshold, so you need to prove to the VAT man that you are an agent working on behalf of the landlords, and are not a re-seller of holiday accommodation. You should have a written agreement with each of the landlords that clearly states that the landlord is the principal who is making a contract with the holiday-maker, and you are their agent. All invoices you issue should show your fees as separate items to the cost of the holiday accommodation. If the holiday-maker pays you for the use of the holiday-let, the bill they pay should clearly show the amount due to the landlord, and the amount due to you as the agent. Ideally the two amounts would be shown on separate invoices.

Q. Now that my top rate of income tax is a whopping 50%, will I get tax relief at that rate if I make charitable donations in this tax year?

A. Yes. If you make donations to charities under the gift aid scheme you will get tax relief at the 50% rate. Your gift is treated as being made after 20% tax has been deducted. When you give £80 the gross amount of the gift is £100. Your personal thresholds for 40% tax and 50% tax are both extended by the gross amount of your donation. For your £80 gift you have an extra £100 of your income taxed at 20% rather than 40%, and an extra £100 of income taxed at 40% rather than 50%. In total you have gained tax relief of 50% (20% +20% +10%) on the £100 gross gift.

Much More ... from Mr P!



In April we introduced you to Mr P, the envelope behind the scenes at Mazuma. Mr P believes in Mazuma being much more than just Accountants. Business is an exciting, but often confusing world, so each month Mr P is hoping to give you some information about other products or services which might be useful to you as a small business owner. These are for information only, just a little something to add to the newsletter so it isn't all tax tax tax!

Word of Mouth Marketing

This month we're hearing from Huw Lewis from The Referral Institute. Huw is based in South Wales but The Referral Institute operates Nationwide. If you are interested then read on, follow the link and ask Huw for more details!

"Is giving good for business? Absolutely! You are probably already giving a lot if you have done well in business, but are you a great giver?

When you give, you strengthen your relationships. Others will hopefully appreciate your giving and one day will help you in return. In the past year I have been tracking my giving and receiving of referrals. As a result I have seen the connection between how much I give and the referrals I receive from my network referral sources. So how is it that I come across more and more people who claim that giving has always come easily for them, but feel that they are not receiving referrals in return? Why are they not benefiting from the givers gain philosophy?

The answer is ......... "it depends." But it will certainly be all their (your) fault!"

To find out more about The Referral Institute visit their website here.



May Key Tax Dates

1 New VAT Scale charges for fuel.

2 Last day for car change notifications in the quarter to 5 April - Use P46 Car.

19 Deadline for Employers' 2009/10 end of year PAYE Returns (P35, P14, P38 & P38A). Penalties for non submission.

19/22 PAYE/NIC and CIS deductions due for month to 5/5/2010.

31 Deadline for copies of P60 to be issued to employees for 2009/10





Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Introducing Mr P!

Introducing Mr P!

At Mazuma we are famed for our Purple Envelopes and the relief that they bring to small businesses.

Our Purple Envelopes are responsible for the relaxed demeanours and timely accounts of many small businesses across the UK!

With this in mind we thought that it was about time we introduced you to Mr P, our chief Purple Envelope!





Mr P has been with Mazuma from day one and if you ever asked him he’d tell you he’s the real brains behind the operation (although we know he’s just an envelope!).

He has, however, been instrumental in shaking up the accountancy industry and forcing less forthcoming accountancy practices to focus on customer service, just like Mazuma do. It’s made him very popular with Mazuma and our clients, but a little less popular with some more traditional accountants, which is why he’s hidden his light under a bushel until now!

Mr P will be introducing lots of snazzy new features like the online Refer A Friend scheme. (Don’t forget if you refer a friend and they sign up, you’ll get £25 of retail vouchers!)

You can also follow him on Twitter or read his blog.

Mr P will be making a regular appearance in newsletters, on the website and across the UK over the coming months so look out for him. He might just have a rather fantastic competition in the pipeline too, so watch this space!

Your Little Referral Friend!

At Mazuma we take great pride in the fact that many of our customers refer us to their friends and associates without any need for prompting from us.

We have learned that in business, referral marketing can be one of the most time and cost effective ways of growing your business. However, like anything, it has to be done properly! That means you have to have a plan, measure it and evaluate how it can be improved.

I thought that I was pretty good at all of this, then I was invited to attend a course run by The Referral Institute which proved to me that I still had a lot of work to do.

Huw Lewis from The Referral Institute in South Wales has kindly penned a few words on the topic which I thought I'd share with you.

Is Giving Good for Business?

Is giving good for business? Absolutely! You are probably already giving a lot if you have done well in business, but are you a great giver?

When you give, you strengthen your relationships. Others will hopefully appreciate your giving and one day will help you in return. In the past year I have been tracking my giving and receiving of referrals. As a result I have seen the connection between how much I give and the referrals I receive from my network referral sources. So how is it that I come across more and more people who claim that giving has always come easily for them, but feel that they are not receiving referrals in return? Why are they not benefiting from the givers gain philosophy?

The answer is ……… “it depends.” But it will certainly be all their (your) fault!

Find out more information about referring business here.

Huw Lewis
The Referral Institute South Wales: Creating Referrals For Life®
M: 0793 909 3781 | T: 0870 050 1715 | www.referralinstituteCF.co.uk

Time is Money - How Wisley Do You Spend Yours?

You are invited to attend a free event for small business owners in and around Bridgend. Discover how you can:

• Manage your time more effectively, become more productive and get the best out of your working day;
• Access FREE business support from the Welsh Assembly Government funded Flexible Support for Business;
• Access the BUSINESS GRANT STRUCTURE in Wales;
• Reduce the hassle that small businesses experience when managing their own bookkeeping and accounts;
• Network with other attendees and the speakers after the seminar - refreshments will be provided.

The speakers will be: Ruth Rowe & Julian Rowe from FS4B and Sophie Hughes & Lucy Cohen from Mazuma. Ruth will hold a short interactive session to give you a much needed opportunity to assess how efficiently you work at the moment and consider options to help you work smarter, not harder. Julian will give an overview of the Flexible Support for Business service and the grant structures that are available to small businesses. Sophie & Lucy will discuss how you can save your time by reducing the hassle that small businesses experience when managing their own bookkeeping and accounts.

Thursday 6th May 2010
So come along before or after you vote!
The Waterton Technology Centre, Bridgend

• Arrival is at 8.00am for registration and refreshments
• Seminars will end at 9.30am followed by informal networking until 10.30am
• Minimal disruption to your working day
• Free of charge to attend
• Goody bag to take away with you on the day
• All attendees will be entered into a FREE PRIZE DRAW held on the day to win fantastic prizes donated by local businesses and the speakers.

Places are available on a first-come-first-served basis. To reserve your place please email reception@mazumamoney.co.uk with your name, business name and a contact telephone number in the email.

The clock is ticking.....

Okay, this post is a little morbid, but.....

The average 40 year old man has just 180,000 waking hours left to live.
Don’t spend that time doing accounts!



That might sound a little bit "doom and gloom", but bear with me! Have you ever marvelled at how much work you can get done the week before you go on holiday? Imagine if you applied that principle every day. The countdown to an event does wonders to focus the mind and really make you realise which jobs are important and which can wait.

Now obviously, as an accountancy firm, we're going to say that having your accounts in order is important, but it really is! However, is it the most important thing for you to be doing, or could you be out there, doing what you do best, while someone else takes care of the accounts?

The same rule applies to other areas of your business (and personal) life. Here are some top tips for making the most of the time you have!

Prioritise your workload.

Write a priority action list at the end of each day, ready for tomorrow.

See the job through – don’t start, put it down and come back to it as it wastes time getting started again.

Delegate wherever possible. Especially unimportant jobs.

Hold efficient meetings. Consider if they are needed at all? Holding meetings standing up or on the phone will shorten them and avoid wasted chitchat.

Say “NO” if you’re not the right person to ask.

Put time aside when colleagues know you’re not to be interrupted each day.

Use call logging sheets, not scraps of paper, to record phone calls.

Distinguish between urgent and non-urgent interruptions. Something that is important isn’t always urgent.

You'll be amazed at how adopting just a couple of those principles will make a difference to how much you get done in a day, and eventually, to your profits!

So, if you don't fancy spending your remaining hours fretting over VAT returns, why not get a quote from Mazuma!

What we don't do.....

This little story made me chuckle and made me realise all the things that we at Mazuma pride ourselves on not doing!

Once upon a time there was a shepherd looking after his sheep on the edge of a deserted road.

Suddenly a brand new Jeep Cherokee screeches to a halt next to him. The driver, a young man dressed in a Brioni suit, Cerruti shoes, Ray-Ban glasses, and a YSL tie gets out and asks the shepherd: - “ If I guess how many sheep you do have, will you give me one of them? “

The shepherd looks at the young man, then looks at the sheep, which graze and says: -“All right”.

The young man parks the car, connects the notebook and the mobile, enters a NASA site, scans the ground using his GPS, opens a database and 60 excel tables filled with algorithms, then prints a 150-page report on his high-tech mini printer. He then turns to the shepherd and says: - “You have exactly 1586 sheep here.”

The shepherd answers: - That's correct, you can have your sheep. The young man takes the sheep and puts it in the back of his jeep.

The shepherd looks at him and asks: “If I guess your profession, will you return my sheep to me?”

The young man answers: “Yes, why not.”

The shepherd says: - You are an Accountant!

“How did you know?” asks the young man.

Very simple, answers the shepherd: “First you come here without being called. Second, you charge me, to tell me something I already knew. Third, you do not understand anything about what I do, because you took my dog!

If you don't want an accountancy service like that, then Mazuma's for you!

April's Tax Tips & News

Welcome...

To April's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Company Car and Van Changes

The taxable benefit charged for the use of company cars and fuel for those vehicles is increasing from 6 April 2010. Say you drive a petrol-powered car with CO2 emissions of 160g/km. In the tax year to 5 April 2010 you are taxed at 20% of the vehicle's list price. From 6 April 2010 the taxable benefit for driving the same car will be 21% of its list price.

The tax position for those who have free fuel with their vehicles is even worse. Until 5 April 2010, the value of the fuel-benefit for all company cars is based on a fixed value of £16,900 multiplied by the percentage used to calculate the car benefit. So there is the combined effect of the increased percentage and the increased multiplier. From 6 April 2010 this value increases to £18,000. This means the taxable benefit of having free fuel for a petrol car with emissions of 160g/km will increase from £3,380 to £3,780.

Company van drivers are also hit by the rise in the fuel benefit. Currently where free fuel is provided in a company van, and the van is used for some non-business journeys, the driver is taxed on £500 per year for the use of that fuel. From 6 April 2010 the van driver will be taxed on £550 per year for use of the fuel.

You can reduce these high tax charges by switching to a low emissions car. Where the CO2 emissions are 120g/km or less the car benefit for petrol cars is just 10% of the list price, and half that amount where CO2 emissions are 75g/km or less. We could only find one car with emissions in that bottom category: Toyota plug-in Prius, which has an official CO2 emissions rating of only 67g/km.

If your vehicle has zero emissions such as an electric car or van, there is no tax charge at all from 6 April 2010. What's more, when your business buys a new electric vehicle it can write-off the full cost for tax purposes in the year of acquisition.

VAT Payments and New Penalties

From 1 April 2010 all VAT payments made by cheque will be treated as being paid on the day the cleared funds reach the Taxman's account. Previously the VAT was treated as being paid on the working day the cheque reached the VAT Office. A cheque will normally take at least three working days to clear. Where VAT payment is received late more than once in 12 months you may have to pay a default surcharge (a penalty).

The Taxman will exercise his discretion not to charge a default surcharge for VAT periods that commenced before 1 April 2010, where the paper VAT form and the cheque payment are both received on time. VAT cheque payments for periods that begin on and after 1 April 2010 will have to clear the Taxman's bank account by the due date, or surcharges may apply.

Where the VAT return is submitted online the payment for any VAT due must also be made online. However this can cause problems where the VAT due for the quarter exceeds £10,000.

Many banks impose a daily limit of £10,000 for electronic payments for both business and personal accounts. Larger electronic payments can be made by CHAPs but this may involve bank charges of up to £35 per transaction. You need to check with your bank in advance about the best way to pay a large VAT bill electronically.

If your business is not already VAT registered but your sales are edging up towards the VAT compulsory registration threshold, (£70,000 from 1 April 2010), you need to be particularly careful about when you register. From 1 April 2010 there is a new set of penalties for failing to register for VAT on time. The penalty is based on the underpaid VAT. The minimum penalty will be 10% of the VAT due, and the maximum penalty 100%. The highest penalty will be charged where there has been deliberate concealment of the need to register for VAT.

New Rateable Values from 1 April

Business rates are a big fixed cost for many small businesses and it is not easy to move to smaller premises if your sales decline. What's more, the rateable value of commercial properties is revised every five years, normally upwards. The latest revaluation takes effect from 1 April 2010, but it is based on the market value of the property at 1 April 2008, when the value of all commercial property was at an all time high!

If you think you property has been valued too highly for business rates, you can appeal against the rateable value of the property. This can be done online through the website of the Valuation Office Agency (VOA): http://www.2010.voa.gov.uk/rli. However, before you decide to launch into an appeal you should check what your neighbouring businesses are paying, and whether they have already submitted an appeal against their premises value. You can also do that online on the VOA website.

You need to have good grounds for your appeal. For example, perhaps something in the property's immediate surroundings has altered and had a detrimental effect on trade. Perhaps there are a high number of empty neighbouring buildings, or there has been a change in the size or use of the premises. The VOA also encourages you to talk to your local valuation office before submitting a formal appeal against your business rates.

You can also apply for small business rates relief where the rateable value of the property is less than £18,000 (for properties in England). This normally needs to be done through your local rating authority. There are different small business rates relief schemes for properties in Wales and Scotland, which will have various caps for the relief available.

The Budget also announced a temporary increase in business rates relief for properties in England with rateable values of up to £6,000. Businesses occupying such properties can claim full exemption from business rates for 12 months from 1 October 2010. In addition businesses occupying English properties with rateable values of up to £12,000 will be able to claim a tapered reduction in their business rates from that date.

New Employment Regulations

There are a host of new employment related regulations coming into force on 6 April 2010. This is a brief summary of those regulations that are likely to affect you or your business.

- Fit notes - these replace sick notes issued by GPs and will state what the worker can do, rather than what he or she is prevented from doing.

- Pension date - the date from which the individual can draw the state retirement pension will not necessarily fall exactly on a woman's 60th birthday. For example, a women who reaches age 60 between 6 April 2010 and 5 May 2010 will have a state pension date of 6 May 2010. This date also affects the payment of the employee's NI contributions.

- NI contribution years - individuals who reach state retirement age only have to accumulate 30 full years of NI contributions or credits to gain a full state pension.

- A single year of NI contributions will count towards the state pension. Until now a person had to accrue at least one quarter of their working life (about 11 years for a man, 10 for a woman) to be entitled to any state retirement pension. Each year of NI contributions will be worth roughly £3.20 of weekly pension at current rates. It will be essential to accurately record the NI number for every employee, so that each individual can collect their pension entitlement when they retire.

- Home responsibility protection credits (HRP) will be given on a weekly basis. This will allow the HRP credit to be combined with actual NI contributions to make up a full year of NI credits. HRP credits are given where a person stays at home to look after a child and claims child benefit.

April Question and Answer Corner

Q. I was trying to sell my business before the new tax year, to avoid a potentially large tax bill from an increase in the rate of capital gains tax. I haven't been able to, so what's the position for the 2010/11 tax year.

A. The rate of capital gains tax (CGT) has been kept at 18% for 2010/11, so you have not lost out by delaying the sale into the 2010/11 tax year. In fact you may benefit from entrepreneurs' relief that applies to gains on the disposal of businesses, and reduces the effective rate of CGT down to 10%. The cap on this relief has been doubled to £2 million for gains made on and after 6 April 2010.

Q. I work as a consultant through my own company based in Surrey. I have just secured a contract in Manchester, which is expected to last eight months. Due to the distances involved I will need to stay in Manchester for at least four nights a week. If I rent a small flat, rather than stay in a Bed & Breakfast place, can my company reimburse all the expenses associated with the flat, such as cleaning costs and cooking utensils?

A. Your workplace in Manchester will qualify as a temporary workplace as the contract is expected to last for less than 24 months. Thus all reasonable travelling and accommodation expenses connected with that assignment can be reimbursed to you by your company. You should provide receipts for all the expenses, unless the amount is covered by a dispensation agreement your company has with the Tax Office, such as for mileage claims.

Q. My company has recently taken on an industrial unit that needs extensive fitting-out before it can be used by the business. How can I ensure that all the fittings I use will qualify for the maximum amount of capital allowances?

A. The cost of fittings that qualify as plant or integral features can be set against your company's Annual Investment Allowance (AIA), which will give 100% capital allowance in the year of acquisition. The AIA cap has been increased to £100,000 per year for expenditure incurred on and after 1 April 2010. Plant is broadly stuff that is not fixed permanently to the building, such as shelves or display units. Integral features are fixed to the building and fall into these five categories:

- Cold water systems (not hot)

- Electrical systems (including lighting)

- Space or water heating systems, including a powered system of ventilation, air cooling or air purification

- Lifts, escalators or moving walkways

- External solar shading



If the fitment does not qualify as plant or integral features it can qualify for 100% enhanced capital allowance (ECA) if it has energy or water saving qualities, and it has been included on the approved ECA list at www.eca.gov.uk.

April Key Tax Dates

5 End of 2009/10 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA's.

14 Return and payment of CT61 tax due for quarter to 31 March 2010.

19/22 PAYE/NIC and CIS deductions due for month to 5/4/2010 or quarter 4 of 2009/10 for small employers. Interest will run on any unpaid PAYE/NIC for the tax year 2009/10



Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.