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01844 274808 info@harmonea.co.uk

Author: Cathy Shults

HMRC phone scams

You’ll never get an email, text message or phone call from HM Revenue and Customs (HMRC) which:

  • tells you about a tax rebate or penalty
  • asks for your personal or payment information

Reporting suspicious emails, texts or phone calls

You can report something suspicious to HMRC’s phishing team, for example:

  • a text message (forward it to 60599 – you’ll be charged at your network rate)
  • an email
  • details of a phone call asking for personal information or threatening a lawsuit

If you receive a suspicious phone call, you can help HMRC’s investigations by providing:

  • your phone number
  • the caller’s phone number
  • the time and date of the call
  • a brief description of the call

HMRC phishing team’s email address is phishing@hmrc.gov.uk.

Your email address and phone number will be shared with other organisations if that’s necessary to close down the scam.

 

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When to incorporate

This is a question we get asked frequently.  Currently sole traders have to pay personal tax on their profits, Class 2 national insurance on profits over £50,000 at 2% and Class 4 national insurance on profits between £9,501 and £50,000 at 9%.  Sole traders have to pay a payment on account if their annual tax bill exceeds £1000.

 

Limited companies do not have to pay payments on account or national insurance but have to pay 100% of their corporation tax 9 months and 1 day after the year end at a rate of 19% on profits.

 

Limited companies can have shareholders unlike soletraders.  When taking the combined personal tax and corporation tax liability for limited companies vs tax and national insurance for soletraders, the rough tipping point is if you have profits of £12,000 or more, it would work out to be more efficient for tax purposes to be a limited company.

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Have you ever wondered why the UK tax year starts on 6th April?

In 1582 Pope Gregory xiii grew tired of the inaccuracies in the existing ‘Julian’ calendar and ordered the calendar to be changed. The Julian calendar named after Julius Caesar had been in place since 45 BC.

Caesar’s calendar differed from the solar calendar by 11½ minutes.

This was not a big problem at the start, however, after 500 years this small inaccuracy had started to build up to 10 days off the solar calendar.  With this in mind, Pope Gregory introduced the Gregorian calendar.

The Gregorian calendar reduced the length of the calendar year from 365.25 days to 365.2425, a reduction of 10 minutes 48 seconds per year!

This and a few other tweaks ensured Pope Gregory’s calendar was a much more accurate time keeper. The Gregorian Calendar was then introduced in Italy, Spain, Portugal and what was then the Polish-Lithuanian commonwealth.

The Gregorian Calendar was initially quite a slow burner in the British Empire, it wasn’t introduced until 1752.  By then the British calendar was 11 days off the rest of Europe, with this due to increase as time passed, the British knew it was time for a change.

On the old British Calendar the tax year began on March 25 (the old New Year’s Day).  In order to ensure against losing revenue it was decided by the British Treasury that the tax year, which started on March 25 1752, would be of the usual length (365 days) and therefore it would end on April 4, the following tax year beginning on April 5.

Time passed smoothly and most importantly accurately until 1800.  Unfortunately 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Thus the treasury moved the start of the UK tax year from the April 5 to the April 6 and it has remained there ever since!

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All you need to know about Directors Loan Accounts  

A director’s loan account is simply a mechanism for recording transactions between the director and the company.  In a family or personal company situation, transactions between the director and the company are commonplace.  The director may lend money to the company or borrow from it, the director’s behalf and salary or dividend payments may be credited to the account.  However, there are tax consequences if the account is overdrawn at the year end and remains so at the corporation tax due date.

One of the main benefits that may be available to a director of a personal or family company is the ability to borrow easily and cheaply, assuming that the company has the funds available.  The rules make it possible for the director to borrow up to £10,000 for up to 21 months without any tax consequences.  If the amount exceeds £10,000 – even for as little as one day – there will be a benefit in kind charge to pay on the loan.  However, this is likely to be significantly cheaper than the cost of a commercial loan, and will not entail the costs and restrictions inherent in obtaining a commercial loan.  If the directors loan account is overdrawn at the end of the accounting period and remains overdrawn at the time at which the corporation tax for the period is due nine months and one day after the year end, the company is required to pay a tax charge on the outstanding loan balance (a ‘section 455’ charge).  The charge is 32.5% of the outstanding loan balance and is payable with the corporation tax for the period.  The rate of tax is the same as the higher rate of tax on dividends.

The section 455 tax can be avoided if any overdrawn loan account balance is cleared before the corporation tax due date.  However, this will not always be the most tax-efficient option as depending on the route taken to clear the debt, the tax payable may be more than the section 455 tax.  Further, the section 455 tax is repaid if the debt is cleared at a later date, with the repayment being due nine months and one day from the end of the accounting period in which it was cleared.  This paves the way for paying the section 455 tax initially, clearing the loan at a later date when this can be done tax effectively and reclaiming the section 455 tax.  If the director has sufficient funds to clear the debt, this will be beneficial from a tax perspective as it will prevent a section 455 charge from arising without triggering tax liabilities on the director.  Whether it is worthwhile to pay the director a bonus or a dividend payment to clear the loan account will depend on the director’s personal circumstances – if this can be done tax-free or at a low rate of tax, it may be preferable to paying the section 455 charge.  However, if the taxpayer is a higher or additional rate taxpayer, paying the section 455 tax will be the cheaper option.  Remember, not only will the bonus or dividend need to be sufficient to clear the debt, it will also need to cover any associated tax and National Insurance.

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Collaborations

Harmonea work with a number of professions in the following areas:

  • Copywriters
  • HR
  • Insurance
  • IT
  • Mortgages
  • Pensions
  • R & D Tax Credits specialists
  • Social Media
  • Specialist coaches
  • Therapists

If you would like an introduction to any of these people, please let us know as we will be pleased to do an introduction for you.

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