Wednesday December 22, 2010

Dear Reader

Merry Christmas from all at Inca

I'd like to take this opportunity to wish everyone a Merry Christmas and a very Happy New Year. We close on Thursday evening 23rd December and re-open on Tuesday morning 4th January - the day the VAT rate changes (see below for more details). As we reflect on the year behind us and look ahead to the one to come, thoughts turn to the many wonderful people who have helped us and touched our lives in 2010.

It also made me think about a recent meeting with a prospective client and how we try to help with tax saving and peace of mind. Joe runs a small carpentry business but had left his tax affairs so late that he ws required to go in person to visit the tax office and file his return. We file client returns online meaning he didn't need to worry about travelling at a busy time of year and especially in difficult weather conditions. We were able to advise that he keep records of mileage on his journey as business trips qualify for tax relief.

Joe is married and his wife Mary helps him in the business. We suggested he consider paying mary a salary to reflect the work undertaken which could save him over £2300 per annum in tax and class 4 national insurance. He was delighted at learming this as it would help buy clothes and equipment for their first baby Mary was expecting shortly. Had Mary been on the payroll earlier in the year, she would have qualified for statutory maternity pay which would additionally have helped the household.

Joe was delighted, though he has left us with a considerable challenge as he advised the new baby would "inherit his father's kingdom" and we are finding it difficult to calculate the value of the estate and therefore the potential inheritance tax liability.

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VAT Increase On 4th Jaunary 2011

As most of you will be aware, the VAT rate increases next year, though on 4th January rather than on the 1st. Any invoices raised after this date need to apply the new VAT rate. If the invoice relates to work undertaken prior to this date then you are allowed to invoice at the current 17.5% rate.

If you're involved in a project which will cross the VAT rate change, then subject to the terms of your agreement with your customer, you can invoice at 17.5% for work completed prior to the VAT increase and then invoice the balance at 20% when applicable. HM Revenue & Customs has published a guide covering different aspects and is available here. Alternatively, give us a call on 01865 821100 or 01235 868888.

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