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Welcome to this new monthly newsletter for 2015. In this edition we’ll look at:

  • Auto enrolment – a quick updateTaxing Times
  • Loans from companies – some pitfalls
  • What’s new in the world of tax?

Also, don’t miss the FREE seminars we are running on Auto Enrolment in various locations throughout the county. We aim to demystify the ins and outs of what you need to do, so you can go away feeling a lot happier about the process – details below!

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Auto Enrolment

The Pensions Regulator has taken the decision to send out letters entitled ACT NOW: You have new legal duties to comply with to all small and medium employers who are due to implement auto enrolment in the next few years. The letter asks the employer to nominate a contact on the Pensions Regulator website to receive all relevant information. We have a client who is not due to “stage for” (implement) Auto Enrolment until 1 May 2017 yet they were asked to nominate a contact by December 2014….over two years in advance! The Pensions Regulator says that they have taken the decision to send out these letters to act as a reminder that Auto Enrolment is coming and employers need to be prepared…

Our payroll team are happy to speak to employers about auto enrolment, so if you are struggling or have any questions call us at the Carlisle office on 01228 530913 or the Penrith office on 01768 864466.

AE newsletter

Save the date…..Free Auto Enrolment Seminar

Dodd & Co are running, with Baines Wilson, free informative seminars on the latest thing to worry employers! We will offer good, honest and practical advice to help you through the minefield of Auto Enrolment. Pick a venue and time to suit you:-

  • Carlisle – Dodd & Co offices, 15 Rosehill – Tuesday 3 February 8am – 10.30am
  • Kendal – Castle Green Hotel – Monday 9 February 5.30pm – 8pm
  • Workington – Energus – Thursday 5 March 8am – 10.30am

The sessions are free for all to attend (clients and non-clients alike) – to book contact Debs Hirst on 01768 864466 or email debs@doddaccountants.co.uk

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Loans from companies – perils and pitfalls

In this summary, we’ll consider the situation where a company makes loans to a director/shareholder. This is of course a very common situation. And the most common instance where a company makes a loan to an individual is when a director/ shareholder either takes cash advances or has the company pay his/her personal bills – thereby generating an overdrawn loan account. Using the company in this way to create an overdrawn loan account means the director doesn’t have to take salary or dividends, he can just increase his overdrawn balance. But (in simplistic terms) HMRC don’t get any income tax without salary or dividends being paid so naturally they do not like overdrawn loan accounts. Accordingly, there are rules designed to levy tax charges when overdrawn lo15431411_lan accounts arise so that HMRC get some tax take!

When a “close” company (effectively one under the control of its directors or 5 or fewer “participators”) makes a loan to a participator, a temporary tax at 25% is payable by the company on any amount outstanding at the end of the company’s accounting period. This is payable 9 months and 1 day after the end of the accounting period although there are some exceptions (set out below). It is a temporary tax as once paid it can be recovered 9 months after the end of the accounting period in which the loan is repaid (or part recovered if the loan is part repaid). But the time delay before the tax can be reclaimed can cause some cash flow issues, especially if the company isn’t expecting to pay the tax in the first place!

So what is a participator?

The rules on exactly who is a participator – thereby triggering the 25% tax charge – are extremely widely written. Broadly, a participator is someone who has an interest in the company’s share capital or voting rights. But it is not only the shareholders/directors themselves you have to consider but also their “associates” – parents and grandparents, siblings (including half brothers and sisters), children and grandchildren, and business partners. And in the last two years, some quite rigorous additional legislation has been introduced to tighten up some apparent loopholes – so for example, loans to partnerships in which the director/shareholder or their family member is a partner also trigger the 25% charge.

In short, if a person, or a close family member, draws money out of the company, HMRC will expect them to pay tax on it, one way or another!

TaxExceptions

If the loan does not exceed £15,000 and the shareholder’s interest in the company is less than 5% then the 25% charge does not apply; or

If the loan/part of the loan is repaid within 9 months of the end of the accounting period in which it was made then the 25% charge will only be applied on any amount which is still outstanding after 9 months.

Summary

The rules on taxing overdrawn loan accounts are complex because people increasingly use them in sophisticated ways to try not to pay the tax. So care should be taken when dealing with overdrawn loan accounts. In fact the whole area of director/shareholder remuneration and extraction of cash from the family company is one on which advice should be taken – preferably in advance!

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What’s new in the world of tax?

bah humbugBaah Humbug

What to do on Christmas day? Spend it with the family, play with the kids, watch the best of festive TV? Not for 1,773 people, who chose to file their self assessment tax returns online on Christmas Day this year! And what to do on Boxing Day? That’s right, more online tax return filing, 4,811 of them this time!

Scottish tax changes may not be ready in time

The Scottish Government faces “potential chaos” next April when its first two devolved taxes come into force, as a report from Audit Scotland says that delays in hiring staff and procuring IT systems will make it difficult to manage the new tax powers effectively.

The report says slow progress in making arrangements for managing and collecting the land and buildings transaction tax (LBTT) and Scottish landfill tax (SLFT) from 1 April 2015 mean there are likely to be cost and performance concerns: ‘‘The risk remains that Revenue Scotland will not fill all of the operational posts in line with its revised plans. If Revenue Scotland does not have the staff in place that it has identified by February 2015, there is a risk that it will not have the skills and expertise required to manage the devolved taxes effectively from 1 April 2015.’
scottish money bank
The report goes on to say: ‘The timescale for implementing the new system is now very tight and there is a risk that the full IT system will not be in place in time. This may have consequences for Revenue Scotland’s performance in collecting the devolved taxes. For example, if Revenue Scotland has to process tax payments manually rather than online it will take longer to process the payments and may increase the risk of errors.’

So…lack of staff, lack of training, insufficient IT resources….surprised?

Finally – Scientific proof that bankers lie for money?

Researchers from the University of Zurich have found what they consider compelling evidence that bankers lie for financial gain. Based on a coin tossing game where a $20 reward could be won, two groups were set up, one of which was a control group of bankers. The bankers group reported significantly more winning tosses, with the proportion who cheated estimated at 26%!!

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Nov 25

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I have always been very pleased with the service from Dodd & Co and wouldn't hesitate to recommend them to friends and colleagues.
-- Jennifer Bianchi