Like it or not, tax season is just around the corner. And as a small or medium UK business owner, this means that if you haven’t got your accounts in order, now is most definitely the time. We’ve created a guide to having a successful tax return season but I’ve covered some of our top tips here to help you.

Company accounts for the year 5 April 2011 must be prepared and filed online by midnight on 31 January. The first installment of your tax liability must also be paid by the same deadline.

Update: HMRC have announced the following The SA deadline remains midnight on 31 January. But HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No customer will have to pay interest on payments due on 31 January that are paid on 1 or 2 February. Full details are available on the HMRC website.

This means it can be a tricky time for any small or medium UK business; tracking back over old invoices, getting paper work in order and paying tax liabilities.

Now, this may seem obvious coming from us but using an accounts software package throughout the year can often take away that last minute strain for you or your accountant.  However, whether you use an accounts software package or not, there are some key considerations and tax changes that you must be aware of to ensure a successful tax return season.

Effective tax planning strategies

We may be too far into this year’s tax season to put this into place now, but something to remember for the next financial year is how important it is to know your profits and therefore your tax liability. It will give you the opportunity to view what you might owe and allow you to put money aside throughout the year to ensure cash-flow doesn’t become an issue. An effective tax planning strategy might just be the difference in keeping your business afloat or actually allowing your business to grow!

Types on income and financial information needed

Regardless of whether you run your business as a sole trader or a shareholder/director of a limited company, to complete your self assessment tax return generally you will need details of the following types of income:

• Interest income from banks and building societies
• Dividend income received during the year from UK and/or foreign equities, or from shares in your own company
• Details of any capital gains made in the year through the sale of assets, such as shares or investment property;
• Property income, such as rental income
• Income received from gilts or bonds (excluding premium bonds)
• Income from a pension
• Income from a trust, settlement or from a deceased person’s estate
• Income from any employment , self-employment or a partnership

Payroll software to help with your income details

Your business’ payroll software should also come in handy for filing your tax return. The payroll should give you details such as employment income – salary, benefits, bonuses, income tax and national insurance already paid and, so on. Shareholder directors should also make sure they have up-to-date information in their systems of any dividends paid from the company to themselves.

Changes to the tax return penalty system: don’t be late!

Making it more important than ever to get your tax return in on time, the new penalty system means that an automatic fine of £100 applies if your tax return is filed after the end of January. And the longer you leave your tax return, the more severe the penalty becomes – meaning a very unhealthy start to the year ahead if your tax return isn’t filed on time!

The top tip for successful self assessment tax return is to really treat it with respect. After all, it is a legal document on which you are declaring your income for the year to HMRC. Proper record keeping and effective accounts management should see you successfully complete correctly and on time!

If you’d like to know more about filing your tax return online then download our white paper for having a successful tax return season

Nicole Matues,  Small Business Team

Since early July, HMRC have been targeting – via a series of direct communications  – approximately 40,000 UK businesses who should now be VAT registered, having already reached the current VAT threshold of £73k. If you are an accountant, you could well have clients who’ve been contacted in such a way.

HMRC say that failure by these targeted businesses to register for VAT will result in serious implications. Put simply, if a business reaches the threshold and remains unregistered, HRMC will recoup the full tax owed and may charge a substantial penalty for non-disclosure.

However, as part of this brief ‘VAT Initiative’ period, HMRC are aiming to raise an estimated £600m from a voluntary disclosure process. The current campaign encourages those with outstanding liabilities to come forward and make a full disclosure in exchange for preferential settlement terms. It states that most disclosures will qualify for a 10% penalty, instead of the normal penalty of up to 100% of the tax, as well as the likelihood of the disclosure being accepted without undergoing any follow up queries.

After the registration deadline of 30 September 2011, HMRC has warned that it will start investigations into businesses that have not come forward, by making use of information compiled using ‘web-bot’ software. Using this software, HMRC can now more accurately pinpoint businesses that have failed to pay the right tax by matching a vast amount of data, enabling a fast and focused response to tax evasion. It highlights previously hidden relationships, uncovering anomalies between such elements as bank interest and property income.

What’s the process if your clients have been targeted under this initiative?

Firstly, the business will have to decide whether it wants to notify HMRC, or run the risk of carrying on unregistered. If the business decides to notify an intention to make a disclosure, it has until 30 September 2011 to do so by downloading and completing the VAT Initiative Notification Form.  Unfortunately, the form can’t be filed with HMRC online, instead it must be posted.

The business then has until 31 December 2011 to provide HMRC with a full disclosure – by filling out a VAT1 form – and to pay the tax, interest and penalties. It’s vital for the business to include on this form the Notification Reference Number (NRN) they receive once the initial notification has been processed.  Without the NRN, a business will not be able to take advantage of the lower penalties on offer as part of the initiative.

The facility also allows for the disclosure of additional, related tax liabilities, other than VAT. Again these can be disclosed with a lower penalty than HMRC would charge during an investigation.

How can Sage accountants help?

Although promoted as a straightforward process by HMRC, it is clear from the guidance there are a number of taxpayers and circumstances where the full benefits of the VAT Initiative may not apply. Businesses in such a position will be advised to contact their accountant.

You may not have any clients who’ve been targeted by the initiative, but we’d still stress the importance of any business to maintain accurate and complete bookkeeping records. Sage offers a range of solutions to assist, all of which boast fast, first-time online filing of VAT. Sage Instant Accounts, Sage 50 Accounts, and our online accounting solution, Sage One*, all offer comprehensive VAT management and online filing. For more information on VAT management software available for your clients, call us on 0845 111 1111 today or visit www.growgreenshoots.co.uk.

*online VAT filing facility offered in Sage One Accounts

Georgina Timothy, Sage Accountants’ Division Trainer

Jon Martingale, Sage Accountants' Division

From 1 June, HMRC has been trialling a ‘single compliance process’ for enquiries across a range of taxes. Most people will not be aware of what ‘single compliance process’ is, so firstly, let me explain what this process is and what it could mean.

The single compliance process is a framework within which HMRC will undertake the majority of future enquiries. The framework uses five process stages (planning, contact, process, resolution and closing) common to most enquiries. Any enquiry will have a set level of intensity dependent on the risks identified. The level of intensity will determine how long the enquiry will last, ranging from 1.5 to 8 days.

The trial will run for 6 months in the following locations:

• Reading/Slough
• Newcastle
• Warrington
• York
• Exeter
• London Euston
• Southampton
• Cardiff
• Belfast
• Edinburgh
• Dundee

During the trial period, the business records of up to 1,200 small and medium businesses will be checked during meetings on business premises. If the trial is successful, the new process will be rolled out nationally from January 2012.

The new process and checks will help HMRC identify mistakes in paperwork and records. If any errors or high risks are detected as part of a check, this will lead to a tax investigation and a fine of up to £3000. If an investigation is undertaken, HMRC will check all areas of compliance – e.g. VAT, income tax, corporation tax and PAYE – as they will work on an assumption that if an error has been made in one area, then errors are likely to have been made in other areas.

HMRC claim that analysis has highlighted how poor record-keeping can lead to underpayment of tax. Once the process is rolled out, up to 50,000 SMEs will be checked each year and HMRC expects to collect an additional £150m a year in tax.

VAT registration

In addition, HMRC have also recently announced a summer campaign on VAT registration. Businesses with an annual turnover at, or close to, the VAT threshold of £73,000 will be checked for VAT registration. It will be important to ensure that businesses who have reached the threshold are VAT registered before any amnesty runs out.

How can Sage accountants help their clients?

It is important that all businesses maintain accurate and complete records moving forward. Sage offers a range of solutions to assist; including Sage 50 Accounts and Sage 50 Payroll, as well as our latest online accounting software – Sage One

Sage One Accounts is an online accounting service for small business owners who want greater control of their finances, but don’t have an accounting background or time for software training. Sage One can automatically calculate VAT based on the information entered by the user, and once it has worked this out will automatically submit the VAT return online in a few clicks. This will allow VAT returns to be submitted to HMRC accurately, efficiently and on time. This can be demonstrated easily to a tax investigator at any PC with an internet connection.

Sage one also offers an ‘Accountant Edition’ to make the process of accountants working with clients seamless and effortless. Accountants simply connect with their clients and access live financial information immediately. This means that the accountant can offer advice and guidance to clients to ensure that they are prepared for any HMRC checks.

Sage One Accountants Edition is available for free to all Sage Accountants Club members*, and you can sign up for a free trial or webex session by visiting www.sageone.com

Jon Martingale, Sage Product Manager

*Standard access fee for Sage One Accountant Edition is £250 per annum. Sage Accountants’ Club members who subscribe to Sage One by purchasing credits for Sage One Cashbook or Sage One Accounts get access for free.

Gary Ging, Sage Payroll Team (enjoying a Newcastle summer)

Online filing

This used to be a laborious task of having to produce two copies of the P14 form for every employee who worked for you during the year and the P35, which summarises all of the information on the P14s. This was all mailed in the post to HMRC (at the employer’s cost) or you went to your local tax office to deliver it personally. And don’t forget that you also have to give a P60, on paper, to all of your employees still employed by you at the end of the year.

The introduction of online filing has changed the way in which employers can send this information to HMRC and this year was the first year in which all employers, with a few exceptions, were required to submit their year end information online. Not only is this much easier than printing lots of paper work (it’s now just a couple of mouse clicks) but it gives you an immediate response from HMRC to tell you that they have received the information and if everything was ok or not.

How did we do?

We recently received our annual Vendor Report from HMRC detailing how our payroll products performed over the 2009/10 on-line filing period and we were once again very happy with the figures – 436,104 successful employer submissions for a total of 7,218,432 P14s.

Since the introduction of on-line filing we have always exceeded the previous year figures but the most pleasing aspect of the latest report is that it’s not just about the quantity of submissions but also the quality.

The Vendor Report doesn’t just tell us how many successful submissions were made using Sage Payroll software but also how many were unsuccessful, and this year there were 661. No, that isn’t a typo – out of 436,765 submission attempts there were only 661 failures.

This gives us a 99.85% success rate, which I think is pretty phenomenal considering the number of submissions made. And whilst 661 submission attempts were unsuccessful, this does not mean that 661 employers who use our products were not able to submit at all – our submission data shows that these employers did make a successful submission after correcting the original problem.

And I don’t refer to the number of failed submissions as ‘only 661’. We believe that this number is too high and so we have already set ourselves a target of improving these numbers for next year – not only on the number of submissions but we’re going for a 100% first time success rate.

On a final note, HMRC have changed their regulations and so from the 2010/11 year end it will be possible to give your employees their P60 electronically. Within Sage Payroll this will mean that you can either continue to print them on paper or email them directly to your employees, complete with password protection.

Gary Ging, Sage Payroll Team