Dean Statham |
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Dean Statham Tax Alert. |
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More on Annual Investment Allowance change |
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In our July update we advised businesses to take care when timing their capital expenditure during 2012. You may remember that the Annual Investment Allowance is being reduced from £100,000 per annum to only £25,000 per annum. The effective date of the change is 6 April 2012 for unincorporated businesses and from 1 April 2012 for companies.
In order to avoid complications, if your year end is different from the end of the tax year (31 March 2012 or 5 April 2012) you should make your investment during the trading year that ends in the fiscal year 2011-12. For example if your year end is December you should invest before 31 December 2011.
Readers have asked us to publish a list of the types of assets that are covered by the AIA relief. They include:
- Tools and equipment
- Computers
- Office equipment and furniture
- Computerised machinery
- Vans for business purposes
- Capital expenditure on computer software
- Integral features of a building, such as electrical systems
Items which do not qualify as plant and machinery for AIA include:
- Cars
- Walls, floors, doors, windows and stairs
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Merging NIC and Income Tax |
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Believe it or not our Government has started a formal consultation process to consider the merging of National Insurance and Income Tax into a composite rate. Whether this remains a paper exercise or actually results in a simplification of our tax system is anyone's best guess.
What next?
There is clearly a great deal of uncertainty around how integrating the operation of income tax and the NIC system would work in practice. Indeed, the Chancellor's announcement acknowledged that 'this huge task will therefore require a great deal of consultation and take a number of years to complete.'
On 11 July 2011 HM Treasury launched a call for evidence which closed on 19 September 2011. Topics that were discussed refer to employers' provision of evidence regarding the administrative burden of operating the two different systems. The majority of the questions raised focussed on the cost and burdens faced by employers and payroll professionals in operating the two systems, although there were some more general questions at the start, asking for feedback on the Governments' objectives of removing distortions, reducing burdens on businesses and improving fairness.
This forms part of the preliminary consultation stages and responses to this call will be added to the details of the Government's proposals for change. A full consultation on these will be issued in Autumn 2011.
Watch this space…
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VAT Bad Debt relief |
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If you use the Cash Accounting scheme to calculate any VAT due to HMRC you are automatically protected from the VAT effects of bad debts - you will only be paying over output tax received from customers less input on bills paid to suppliers.
If you are not using Cash Accounting or other special schemes that allow you to pay on a receipts basis, then potentially you can be out of pocket. Your remedy is Bad Debt relief.
The VAT bad debt relief rules seek to deal with the issues that can arise when an invoice has been issued to a customer and no payment has been received after a significant period of time has elapsed. The relief allows businesses to reclaim the VAT paid to HMRC.
There are a number of conditions which must be met in order to claim bad debt relief. The following conditions apply:
- Businesses must have already accounted for the VAT on their supplies and paid it to HMRC.
- Businesses must have written off the debt in their day to day VAT accounts and transferred it to a separate bad debt account.
- The value of the supply must not be more than the customary selling price.
- The debt must not have been paid, sold or factored under a valid legal assignment.
- The debt must have remained unpaid for a period of six months (but not more than 3 years and 6 months) after the later of the time payment was due and payable or the date of the supply.
The procedure for claiming bad debt relief is quite straightforward under normal circumstances. Once all of the conditions have been met the VAT claim is made by including the amount of the refund on Box 4 of the VAT return for the period in which the debt became over six months old.
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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers' circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred. |
Dean Statham,
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Tel: 01782 614618 Fax: 01782 717287.
Web: www.dsonline.co.uk.
Dean Statham is a limited liability partnership, registered for VAT under reference 812 0016 96. Partners in the firm are members of the Institute of Chartered Accountants in England and Wales (ICAEW). This body has its headquarters in the UK and its rules of professional conduct can be obtained from its web site.
Dean Statham are authorised to act as statutory auditors by the ICAEW. |
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