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Tax Newsletter 29 Oct 09

This week is half term for many people (well their children really) but there's nothing half baked about the practical tax tips we're sharing with readers. Firstly we refresh our memories about the tax implications of two situations, which may become more common as this recession drags on: winding up a company and letting rooms to lodgers. We also offer a stark reminder of why you and your clients should not rely on verbal tax advice from HMRC 'helplines'.

Upgrade to Professional Membership

You can secure your entitlement to this newsletter each week as well as to discounts and other membership benefits - depending upon which professional membership level you choose. Upgrade now and ensure you don't lose out any longer. Most people find it simple enough to do online especially since we revised the process. If you had tried before and got caught in a loop - my apologies for the inconvenience. That's now sorted. If you do have any problems though just call and ask for Morag who will do what she can to assist.

After the practical points in this newsletter I have put the Spotlight on one of our tax adviser members and offered another item for the tax fun spot.

You may also be interested to note a couple of recent changes we have made to our website. The home page looks somewhat different, search results now contain extracts from tax adviser profiles and we have updated the FAQs and added a link to these from the main menu bar.

For now, on with this week's practical points:

 Winding up a company

Accountants are telling us that some of their clients are giving up on trying to sell their business pre-retirement. The continuing recession has reduced turnover in many cases and some clients may be forced to close down their limited
companies and become employees of larger concerns.
Generally a licensed insolvency practitioner needs to be appointed to distribute the assets of the company, but this can be expensive. It will however protect the shareholders from subsequent claims by unpaid creditors of the company.
Where there are no such creditors and the company has relatively little share capital you can use an informal procedure under Extra Statutory Concession C16 (ESC C16), which does not need a liquidator.
You need to apply to the HMRC office that deals with the corporation tax of the company concerned for permission to use ESC C16, and that application needs to include the following assurances given by the company secretary and its shareholders. These assurances go beyond those included in the old ESC itself.

Sorry - the rest of this item, our practical advice and useful links are only available to professional members.

Letting rooms in the taxpayer's home

Some clients may be supplementing their falling income by letting rooms in their
own home. Where the property is in the UK, and the room is let furnished as
residential accommodation, the income can be covered by rent-a-room relief. This allows up to £4,250 of rental income to be received tax free per tax year. Where the property is owned jointly each owner can receive up to £2,125 of rental income tax free per year.
HMRC insist that rent-a-room relief cannot apply where the room is used for non-
residential purposes, such as an office. This is....

Sorry - the rest of this item, our practical advice and useful links are only available to professional members.

Verbal tax advice

In our newsletter of 28 May 2009 we discussed the case of Corkteck Ltd, who relied on the advice from the HMRC VAT helpline and ended up with a VAT assessment for over £300,000. Now Acrylux Ltd has been landed with a VAT bill of over £75,000 because it believed the verbal advice from HMRC's VAT helpline.

Sorry - the rest of this item, our practical advice and useful links are only available to professional members.

If your client has a property related VAT problem, please ask for advice from one
of our VAT experts as VAT mistakes on property are always expensive.
Regular readers will know that we operate a helpline facility. Although this can be very cost effective (£25 plus VAT) there is a danger, as evidenced by cases such Acrylux, that quick answers provdied over the phone may simply confirm what you want to hear.
In the Acrylux case the taxpayer may not have provided all of the key information when calling HMRC and seeking a view. The same can be true of our own helplines. This is one of the reasons why it can be safer to go direct to a specialist, set out all salient information (which they will invariably request) and only then to rely on and pass on the definitive advice to your client.

Spotlight on: Phil Brigstock-Bates

Phil is one of our founder members and has a very distinct area of specialist expertise. Over the last 15 years Phil's focus has been on Customs Duties - an area of tax advice that I only encountered myself for the first time a few years back. Before developing this specialism at PwC and then E&Y Phil had a much broader tax role and is now a Fellow of the CIOT. He started his own practice in 2004.

As Phil explains in his profile:
"Customs Duties is often the hidden area of tax buried in the costs of manufacturing, sourcing, purchasing, transportation or distribution but which hits the bottom line. It need not be so. Just like other taxes, customs duties can sometimes be removed, sometimes be reduced, sometimes be deferred. This requires management."

I wonder how many accountants have clients who pay large sums of Customs Duties? And which no one has reviewed to consider if there is a better way that would save money and time on an ongoing basis?

You can see Phil's full profile here. It usefully contains examples of the sort of issues that your clients might have if they pay customs duties of any material amount. Do check it out if you have any such clients.
You can see all of the other tax adviser member profiles simply by choosing a topic from our list of over 30 specialisms - or using the free text search bar which you will find at the top right of the screen on every page of the website.


Tax Fun spot

You'll be aware of all the scam emails being sent out supposedly from HMRC and that HMRC ask for these to be forwarded to them. So, what happens when you forward an obvious scam tax refund e-mail to HMRC's dedicated email address ?

One of our subscribers received this automated reply:
-----------
Subject: Inappropriate Attachment

The following email message contains an unacceptable attachment and has been blocked.

From: peter@xxxxxxxx
To: phishing@hmrc.gsi.gov.uk
Subject: FW: Recalculation of your fiscal acitivity
Date: 10/20/09
Time: 14:01:23

The Sender should contact the addressee to discuss an alternative method of sending the information.

The blocked message will be deleted after 30 days.
----------------
In other words HMRC's spam blocker blocks the very messages that HMRC is asking people to forward to them. Doh!

Items appearing in this 'tax fun' spot are taken from the Accountant-Jokes.com blog - with my permission!


Upgrade to Professional Membership

You can secure your entitlement to this newsletter each week as well as to discounts and other membership benefits - depending upon which professional membership level you choose. Upgrade now and ensure you don't lose out any longer. Most people find it simple enough to do online especially since we revised the process. If you have any problems though just call and ask for Morag who will do what she can to assist.

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