Showing posts with label SATR. Show all posts
Showing posts with label SATR. Show all posts

Tuesday, August 15, 2017

I make no money: do I still need to file a tax return?

Quite often people assume that, because they make no money, or because they don't make enough to pay tax, they don't need to make a Self Assessment tax return. Unfortunately that is not the case and failing to do a tax return when you have to exposes you to serious penalties. While for most employees, there is no need to file a tax return since tax is taken at source through the PAYE system, they are many instances where you will have to do a tax return, even if failing to do so does not impact the HMRC coffers.

Obviously, one can understand that if you have additional income that generates additional tax, you will in most instances be required to file a tax return. There are instances however where, even if there is no additional tax due, you will have to file a tax return anyhow. Here are a few examples:
  1. You are a director of a Limited Company. Even if the company has not distributed any dividends, you are required to file a tax return every year. 

Friday, August 15, 2014

Using goodwill to save tax on incorporation

Incorporating a sole trader may happen for a number of reasons. For example you started a business on the side not sure whether it would work out and you wanted to reduce overhead costs initially. After a while the success is here and you want to make use of the lower taxes enjoyed by limited companies. Another reason could be that you had paid significant taxes prior to starting your business and because, as a sole trader you can offset trading losses against salaries in previous years, it makes sense to not incorporate right away if you know that your business will incur losses initially. Once the business starts to make a profit however, it makes sense to incorporate.

Incorporating means creating a company and having this new company of which you are the shareholder buy the existing unincorporated business from yourself. If the value of your business is say £100,000 you will make a capital gain of £100,000 and your company will have a goodwill of £100,000 on its balance sheet (assuming there are no fixed assets). Either the company pays you right away or most probably it credits the director's loan account allowing you to draw funds as they become available in the business. But why is it a good thing?

Friday, February 14, 2014

What is a reasonable excuse?

The deadline for filing your 2012/2013 tax return has come and gone and now 710,000 taxpayers will receive an initial fine of £100 (assuming they actually fine before the end of the month still).

That is unless they have a "reasonable excuse". But what is a reasonable excuse?

HMRC gave the following as examples of what they would consider to be a reasonable excuse:

  • A failure in the HMRC computer system
  • Your computer breaks down just before or during the preparation of your online return
  • An extended period of exceptional weather very close to the filing deadline (which may be very relevant this year)
  • Delay caused by HMRC reviewing the need to complete a return
  • Loss of tax records through fire, flood or theft
  • Serious illness
  • Disability
  • Bereavement
  • HMRC Online Service does not accept the return (where it can be proved a genuine attempt to file was made)
  • Delayed receipt of online activation codes after having registered to file online (new for 2012/13 returns)