If both are paid say £6,500, the amount on which employer’s NI is charged is £780 x 2, ie £1,560.  At 12.3%, the NI payable will be £192.  If, however, you pay one individual £13,000 to do the same job, employer’s NI will be charged on £7,280, so you will be paying £895 in NI.  There is therefore a saving of £703 per annum at current rates of Employer’s NI.

Using childcare vouchers, to a maximum of £55 per week, is also tax effective as they are not subject to Employer’s NI.

The savings need to be weighed up against costs of training two employees instead of one etc.

You must wait until the European Court has confirmed the Advocate General’s decision (it may reject the decision but this is unlikely) but compile the details so that you are ready to make a claim as soon as it is possible.

Any payment which remains overdue for 6 months can attract a further 5% penalty and yet a further 5% if overdue after 12 months.

So, if you think you won’t be able to pay your PAYE on time, contact HMRC before the due date and you may be able to come to an agreement for late payment and avoid any penalty - providing you stick to the terms of the payment agreement.

Also, if you don’t have any PAYE in a particular month, don’t forget to complete the payment slip with ‘Nil Due’ so that the taxman knows that you haven’t just forgotten to pay him.

This should mean that there will be a longer timescale between inspections.  If you have recently had an inspection and receive notice of a combined inspection - or Cross Tax Check (CTC) as they are now called - notify the tax office and they may put you further down the list but they are not obliged to do so.

If you have different advisors for different aspects of your tax affairs, authorise one to act as your CTC co-ordinator as this may cut down on the inspector asking duplicate questions from the different advisors.

If your private mileage is less than 10,000 miles per year, it may be worth claiming the VAT on the business element of fuel rather than claiming the VAT on all fuel and applying the fuel scale charge for the private mileage element.

From a business and tax point of view, most allowances and levels have been frozen at last year’s levels.

The big exception to this is the much-trailed 50% income tax rate for those of us lucky enough to have income in excess of £150,000 during 2010-11. Dividends will be taxed at 42.5% and NI contributions will be increased by 1p next year.  Also, the personal allowance will be withdrawn on a tapered basis for people earning in excess of £100,000 per annum.  Anyone earning in excess of £112,950 in 2010/11 will not receive a personal allowance.

Another exception is the increase in Annual Investment Allowance (the value of fixed assets that you can write off within a tax year) from £50,000 to £100,000. In small business terms this is most likely to be useful for businesses starting up close to the tax year end (they can now write off £8,333.33 of assets for each full month of trading rather than £4,166.66).

Corporation tax remains at 28% and entrepreneur’s relief for capital gains tax is to be raised from £1m to £2m effective from 6 April 2010 so if you are considering a disposal of a business, check if it is worth delaying until after 5 April.

Stamp duty for first-time buyers has been abolished on purchases of houses costing less than £250,000, with immediate effect. This was previously £125,000 and is in place until March 2012.  The relevant date is the date of completion not the date of exchange and only applies to buyers if none of the buyers in any one transaction have ever owned a property before (so people returning to the housing market, divorcees buying under their own name, couples buying jointing where one of the two has bought a property before do not qualify). Buy-to-let residences are also excluded.

Duty on alcohol has been increased by 2% above inflation, while ciders have had an extra 10% slapped on them.  This is bad news for Somerset cider producers.

An important thing to note is the tightening up on late submission of VAT returns. Late submissions will now carry penalties.

The turnover threshold for compulsory VAT registration will rise from £68,000 to £70,000 on 1 April 2010.

Partnerships must submit a paper Form VAT2 as there is no online facility yet for this form.  At the moment, sole traders are probably the only group who can save time with online registration.

If your customer pays you after you have claimed tax relief, you will need to include that payment as income in your next tax return and pay any tax due on it.

You will not be liable for personal income tax on reimbursement of these expenses by the company.

• the debt is more than 6 months old and less than 3years and 6 months old;
• you have written off the debt in your VAT accounts and transferred it to a separate bad debt account;
• the debt has not been sold or handed to a factoring company;
• you did not charge more than the normal selling price for the items;
• you are only claiming VAT on the unpaid proportion of any invoice.

To claim a repayment of VAT, include the amount - at the original rate charged - with your purchases for that period, putting the total figure in Box 4 of your VAT return.  You will also need to keep a record of the original invoice, the VAT amount and the period in which it was originally paid, the period in which it was reclaimed and a history of any payments on account.

If your customer subsequently pays you, you must account for the VAT on the receipt and include it in your next return with your Sales figures.

The requirement to report the supply of services came into effect on 1 January 2101 and can be a complex area.  There is help available from HMRC on their website at

http://www.hmrc.gov.uk/vat/managing/international/esl/reporting-esl.htm#2

This service enables you to check the code number in force for your employees and download a copy for your files.  You can also check what forms have been submitted by you and add comments if necessary.

More information is available from HMRC on their website at:

http://www.hmrc.gov.uk/paye/tools/pdv/index.htm

Alternatively, you could consider keeping the company running and release the profits through the payment of dividends over a number of years. Tax-free allowances and rate bands can be used to maximise the dividend payable each year.  Transferring some of the shares to your spouse could mean that they too can withdraw dividends to utilise their tax-free allowances and lower rate tax bands.

Further indicators of such a relationship include the level of control you exercise over the work, when it is done and who provides most of the tools of the trade, as is whether you pay on a job-by-job basis or on an hourly or daily rate.

If you are a company director and the service is something you could use for personal purposes, then you will be taxed on the benefit-in-kind (BIK).  The value of the BIK is based on the cost of providing it so if, for example, your customer can sort out your home computer for you and the only cost is the hard-drive, then this is the cost that you will be taxed on.  The BIK will have to be included on your P11D so don’t forget to get your customer to itemise this cost on his invoice.

There are four different methods for dealing with this:

• claim 100% of the VAT if there is NO private mileage;
• Use the HMRC scale charge payment for the private element, information available on http://www.hmrc.gov.uk/budget2009/bn69.pdf.  This may not be appropriate if your annual mileage is low so you need to keep an eye on this to ensure you are not losing out;
• mileage method, keeping a record of mileage for business purposes (for cars and vans, that’s 40p for the first 10,000 miles, 25p per mile thereafter in the tax year);
• reclaim nothing - though a disclaimer to this effect will relate to all your vehicles, including commercial trucks etc.

There may be VAT periods when one or other method is more appropriate and you can change your method from one period to the next.

<!–[endif]–>

To qualify for the full basic pension, currently £4,953 per annum, you will need 30 years of full contributions, effectively £165 per year of contributions.  This will cost £626.60 (£12.05 * 52) per missing year. To make it worthwhile topping up, you would need to collect your pension for almost 4 years - £626/165.

For others not reaching retirement age before April 5 2015, topping up is restricted to buying a maximum of six years of contributions, with at least one full year already on record.

Providing him with your bank details - securely - will also speed up the process as he can refund the money directly into your account.

The effect will be to allow 100% capital allowances in the year of purchase.  The re-definition applies retrospectively to April 2008 so if you have purchased a double-cab pick-up since then, you can claim full tax relief for it.  If you have already submitted a claim, you are entitled to amend it.

While there are the more obvious factors of salaries, dividends, tax implications for capital allowances and loss relief, one less obvious factor relates to motor cars.  The treatment of cars for tax purposes differs depending on whether you are a partner/sole trader or a director of a company.  There is a big benefit-in-kind charge for directors who have a company car.  The company also has to pay Class 1A NI contributions on the value of that benefit-in-kind.  On a car costing £20,000, and using current rates of tax and NI, the total additional cost of the car will be almost £13,000, some of which is picked up by the director and the balance by the company.

If a car is part of the deal, this needs to be factored in when deciding on which route to take.

• give them as much information as possible to enable them to give you as appropriate an answer as they can; and
• keep a written note of what was discussed and follow the conversation up with a letter to them, setting out your understanding of what was said.  Request written confirmation or clarification if they do not agree.

This applies to all tax and HMRC-related topics.

In the unlikely event that he does arrive unannounced, the best thing to do is to remain calm, say it is not a convenient time and try to re-arrange a mutually convenient time, possibly at a neutral venue such as your accountant’s office or even suggest that you will come to his office.

If the VAT effect of the error is less than £10,000, you can adjust your next VAT return.  If it exceeds this amount, you need to advise the Taxman in writing and provide him with full details of the error.  Do not also adjust your VAT return as this may result in double accounting for the VAT.

The Taxman may charge a penalty for underpaid VAT if he thinks you didn’t take ‘reasonable care’.  It is best practice to advise him of errors of less than £10,000, if only to show willingness for full disclosure as this may reduce or even eliminate the risk of him charging a penalty.

Main accountancy bodies are co-ordinating responses - watch this space.

Cars have not qualified for the Annual Investment Allowance since it was brought in last year and are subject to the new Capital Allowances rules (less advantageous than the old ones). They now get a First Year Allowance of 40% (for this year only; 20% in any other year) on the business element, and 10% on the reducing balance thereafter. However when the car comes to be sold then there is no longer a balancing allowance available for the full remaining cost; instead the business only gets 10% of the remaining balance after sale proceeds deduction - the rest is lost.

Consider providing employees with a car allowance rather than a car - it will usually turn out to be cheaper for all concerned (unless the car really is needed for business and has high mileage).

It does however indicate that at the very least HMRC will be expecting businesses to keep some basic records (a box of invoices and bank statements handed to your accountant at the end of the year is not likely to be acceptable), and these will likely include an analysed cash book, the ability to work out a statement of debtors and creditors, till reconciliations if the business deals in cash, a detailed VAT account if the business is VAT-registered, and a breakdown of capitalised items. Other records may be added depending on the type of business.

Paying yourself dividends is absolutely fine but you must ensure that you have post-tax reserves available at the time of payment - this means putting some accounts together.

In addition, in light of the Government’s stated intention to look carefully at the extent to which profits are extracted as dividend rather than salary, you should also:

- Ensure that the distribution is approved via a signed board minute (even if there is only one director / shareholder)

- Prepare a dividend voucher to evidence the payment, date & tax credit

This relief has been restricted as a result of FA 2008 to losses of not more than £25,000 per year or to losses incurred in businesses in which you work at least 10 hours per week. That is, large losses incurred in part-time businesses can no longer be offset against other income. Therefore if you are likely to fall into this category record the time spent on your business, including all the administration stuff, emails, phone calls, doing the books etc. - it all adds up and is useful ammunition if the taxman ever asks.

These payments enable employers to pay employees tax-free if they are passengers in a car being used on a business trip. Therefore if you have 3 employees going to the same meeting, instead of them driving separately and being paid up to 40p per mile you can get them to share, pay the driver up to 40 per mile and the passengers up to 5p per mile. This could reduce your travel costs significantly.

A full set of Q&A can be found on www.hmrc.gov.uk under the ‘VAT’ section but key points to note are:

- the rate of VAT to charge depends on the date of supply of the goods /services not the date of the invoice unless the invoice is issued within 14 days of the goods changing hands in which case the invoice date applies.

- If using accounting software you will need to change the VAT rate used by the system; usually this is something that can be done in the company preferences. If using an online ordering & invoicing system you will need to ensure that invoices raised on customers carry VAT at the new correct rate.

The deal is that you can claim VAT back on services received in the previous six months ( a service relates to anything where goods do not change hands - e.g. accountancy or training) or on goods received in the previous three years provided that the business still possesses them. This will tend to apply only to fixed assets or items still in stock. The business will need to have proper VAT receipts for these items and although VAT-registered suppliers are not obliged to provide VAT invoices to non-registered customers (though most will) there is a retrospective requirement to do so after registration.

This ‘one-off’ VAT win should be added to the business’s first VAT return as purchases.

However just as it is possible to claim VAT on goods purchased pre-registration so VAT becomes repayable on goods held at the time of deregistration. This includes goods for resale and assets used in the business. VAT of less than £1,000 is ignored so if the business holds VATable stock and assets of £6,666 or less (or £5,714  when the VAT rate reverts to 17.5%) no VAT becomes due.

If thinking of deregistering it therefore makes sense to run stocks down to a minimal level. In addition, if stock is damaged then it can be valued down for VAT purposes to the price expected to be payable for the goods in their current condition.

- The flat rate schemes works by levying VAT as % of business turnover (the exact % depends on the industry) and blocking input tax on purchases. This tends to work well for profitable businesses using a large number of unregistered suppliers and less well for businesses making losses or whose VAT position is neutral or in a refund position

- The annual accounting scheme requires a business to make monthly payments for nine months (months 3-11) of the year and a single VAT return plus balancing payment in month 12. This reduces the administration of 4 VAT returns but puts all the pain into a single month instead.

The cash accounting scheme allows businesses to account for VAT on the basis of cash received and paid - this is most suitable for businesses with credit customers who take a long time to pay.

Where a business spends less than £50,000 per annum on business capital items meeting HMRC definitions, it will now be acceptable to offset the full cost against profits arising in that same year. Capital Allowances on costs above this figure will be available but at a very low rate. At the end of the tax year and if close to the spend limit it is therefore worth considering whether it is feasible to defer expense into the following tax year.

This is in order to offset the effects of the abolition of the 10% tax band which took effect from the beginning of the tax year. Upper rate tax payers will not be affected by this change and most employees will receive a tax refund or pay a reduced amount of tax in their September salary. For taxpayers making payments on account it may be worth considering whether the increase in allowances will warrant a decrease in the payments on account for 2008/09, the first of which will be due on 31 January.