James Mason from accountants Fifth Element talks straight about business

What’s Hot – Feb-12
Fifth Element, February 2012 and this is the news…

On a personal level 2011 had a huge amount going on. I did think on the basis that nothing continues forever (death, taxes, Peter Andre episodes aside) that 2012 would be calmer, quieter, less eventful and that we could deal with the Eurozone without much else t-boning the issue. Then Scotland gears up its intention to leave the Union. You have to smile. On the one hand we have Germany fighting for a unification of Europe that it has struggled through two world wars to achieve and in Britain we can’t keep our internal regions from de-unifying. What next, Brighton and Hove to become independent tax havens? Now there’s a thought. One thing’s for sure, nothing is certain, but in the spirit of Fifth Element here is some navigation in a sea of uncertainty.

This is hot
Allowances, Bands and Salaries
The individual personal allowance increases by £630 to £8,105 from April 2012 but it is negated by a decrease of £630 on the upper threshold of basic rate tax down to £34,370. In most cases though, basic or high rate tax payers under £116k will be better off by £126. The employee NI lower band increases by £7 per week to £7,592 per year and the employers by £8 per week to £7,488. In most cases the NI annual savings will be £44 per employee and £57 for the employer. Director/shareholders who take salaries pitched where a NI liability starts should increase their annual salaries to £7,480 for the 2012/13 year.

78% Tax Relief for Investors
Currently by putting money into an EIS company you can qualify for a credit against your tax bill equal to 30% of what you invest. In addition, subject to meeting some terms and conditions, CGT can be deferred up to the amount invested, growth is often CGT free, and EIS shares are IHT exempt. Good news is that Ozzy’s new Seed EIS goes further than this from April 2012. The 30% credit increases to 50% and applies on whether you pay tax at 20%, 40% or 50% and for investors investing in 2012/13 the CGT isn’t just deferrable, it’s permanently reduced. Be careful though as Seed EIS investments can be risky so take proper advice.

This is not
Death of a Loop-hole
Until recently if you filed your tax return up to midnight on 1st February you could argue exemption from the £100 late filing penalty for missing the 31 January deadline. This arose from a loophole in the law surrounding the issue which HMRC really didn’t like. So they closed it in the 2011 Finance Act. From 31 January 2012 you’ll be hit with a £100 fine for being 1 minute late.

PAYE Codes and Underpayments
The Taxman is arguing that he cannot code-out 2011-12 underpayments of PAYE using an adjustment to the individual’s 2012-13 tax code because of regulations. Check with your accountant though because his reasons for not doing so can be challenged. Politely tell the tax man he’s wrong and direct him to his Working Together minutes, June 2011, paragraph 9.6.

And finally
Everything above sort of speaks for itself but if I had to add anything it would be this. If you do leave it the last minute, always ensure you file your tax return before you go down the pub instead of when you get back because apart from ensuring you won’t get a late filing penalty it will also give you something really interesting to talk about.

Fifth Element is a local Brighton-based accountancy practice offering expertise in all aspects of Accounts Preparation, VAT, Taxation, CIS, PAYE, Tax Planning, HMRC Issues and Business Development.