Don’t let HMRC ruin your summer (and next year)
Published at 14:07, Friday, 06 July 2012
July 31 may not seem like a very significant date for many people but for the self-employed it’s time to make another payment towards their tax liability.
The position is complex but 50 per cent of their tax liability to April 5 2012 will have been paid in January 2012, together with any balance due from the previous year. The July payment is the remaining 50 per cent of the 2011/12 tax liability.
One question that often arises is what do I have to do if my profits to April 5 2012 aren’t the same as the previous year?
The answer is simple where your profits are higher – there is nothing further to do because your payment in July does not change. However, you will face a higher January 2013 tax payment because of the increased profits for the year.
On top of this higher payment there is a higher payment on account for the next tax year. Therefore, you’ll need to consider the next year’s profits again to see if this payment on account can be reduced.
However, if you consider your income for the 2011/12 tax year is likely to be less than in the previous year you can make a claim to reduce your July payment.
You can do this by downloading form SA303 from HM Revenue & Customs’ website (www.hmrc.gov.uk) and completing this yourself, or asking your professional adviser to do so on your behalf. It is important to note that if the July payment is reduced too low the difference between the amount paid and that due will incur interest until it is paid.
Furthermore, great care is needed for those in the construction industry.
In this industry, businesses are required to have up to date tax payments. Therefore, if you reduce your payments incorrectly, leaving a balance that would be paid late, HM Revenue & Customs could withdraw the gross payment status, which could be devastating for the business
For those whose accounts haven’t, as yet, been prepared, now is the time to gather the information together in order to make a forecast for the year. Anyone in business who has a March year end, for example, is unlikely to have their accounts finalised by July. However, it may be possible to gauge the profit level by examining internal management accounts and reduce the payment, if appropriate.
It is also possible to take action now to reduce your 2011/12 liability by making an investment into an Enterprise Investment Scheme or other such investment. As long as this is done before October 6 2012 you can obtain half of the tax relief in the 2011/12 tax year.
The rules for these investments are fairly complex but suffice it to say a significant tax saving can be achieved and the July tax burden could be reduced considerably.
There are many factors to consider when forecasting an accurate figure for the July payment on account, so professional guidance can be a real help to make sure you only give the taxman what he is due.
For more information or tax planning advice email email@example.com or call freephone 0800 195 2161.
Published by http://www.cumberlandnews.co.uk