From June 20, all subsequent returns should be filed online and VAT payments will also be collected electronically.

Stephen Banyard, director of HMRC’s Business Customer Unit, said: “The majority of customers affected by the new arrangements have already enrolled for HMRC’s VAT Online service, and many have also filed their first returns online.

“However, if you’re a VAT-registered trader who’s affected by these changes, and you haven’t yet signed up, you need to take action now.”

Customers wishing to sign up for the VAT Online service should go to the HMRC website – www.online.hmrc.gov.uk/registration.htm – and follow the instructions on the screen.

Extra Statutory Concession (ESC) B46 – automatic penalties for late company and employers’ and contractors’ end-of-year returns allows companies and employers to avoid late filing penalties for presenting Company Tax returns (CT600), Pay As You Earn (PAYE) end-of-year returns (forms P35 and P14).
or employers’ and contractors’ (Construction Industry Scheme) end-of-year returns, provided they are received by HMRC by the last working day within seven days of the filing date.

ESC B46 will come to an end on 31 March 2011. Taxpayers submitting Company Tax returns and employers’ end-of-year returns after this date must make sure the returns are submitted by the required dates.

ESC B46 is redundant because the possible causes of late filing it was intended to address can no longer arise due to online filing.

Any late returns will receive an automatic penalty. Penalty removal can be requested if a reasonable excuse for the delay in filing is accepted.

As well as this, companies must file accounts and tax computations in a set format – Inline eXtensible Business Reporting Language (iXBRL).

For directors, this means your company must be set up under the HM Revenue and Customs online filing system for corporation tax – and while you are doing that, you might as well authorise payroll and VAT filing online as well.

If your company needs online authorisation, bear in mind that this can involve HMRC sending out passwords in the post and can add up to a month to the filing process – and filing documents late can trigger fines and penalties.

Yardleystar is a an HMRC authorised online agent and can file all accounts, forms and returns online as required under the new rules for corporation tax, self assessment, payroll and VAT.

Yardleystar will handle the switch-over admin for free for new company formations and clients switching to our corporate tax and accounting service.

Contractors need a comprehensive tax and accounting package to cover VAT, payroll and company accounts.

Many new contractors like to have a step-by-step guide to setting up and running their first company to avoid the pitfalls of the tax man launching an IR35 inquiry.

The service includes:

• Quarterly VAT returns and book-keeping
• Monthly payroll for two directors
• Year-end accounts
• Corporation tax returns and computations
• Payroll filing – Forms P35, P14, P11d(b) and P11d
• Dividend vouchers
• Unlimited free tax and business advice by phone and email
• Online filing of tax returns and forms
• Free switching of your company from another accountant

Click here to for a free telephone consultation to set up your account with Yardleystar now

Steering a way through complicated VAT motoring rules is complicated for many but the VAT man will put the brakes on claims if they are not correctly documented.

Don’t forget only VAT registered businesses can reclaim VAT although all businesses have to deal with income tax on private use of a business car.

Different VAT rules apply to private use of a business van.

Keeping records and claiming VAT is the same for a director and a self-employed trader, but a director should consider income tax on a benefit of private use of any business vehicle

Keeping a mileage log

The first step is getting in to the habit of keeping a mileage log of every business journey.

Drivers need to show the date of the trips, start and destination addresses, miles travelled and the registration number of the car so this can be cross referenced to the type, engine size and CO2 emissions of the vehicle.

The log will capture all information needed to work out any calculations for VAT and relating to the driver for any income tax attached to private use of a business vehicle.

At the end of the month, convert the log in to an expense form.

In practise, few tax or VAT inspectors argue with a mileage log, so long as the claims are reasonable and fall within the rate guidelines, there should be no problems. Some clients photograph their car mileometers at the beginning and end of each month and date stamp the images as a belt-and-braces measure to prove mileage.

Claiming VAT on petrol and diesel for business on a car you own

For most drivers, it is more tax effective to own a car privately and claim a mileage allowance for business trips.

HM Revenue and Customs publish mileage rates and unless you have a good reason to pay more, then claims should stay within these guidelines.

A VAT fraction is applied to the reclaimed amount and put through the VAT return.

Claiming VAT on petrol and diesel on a car owned by the business

If the car is used outside of work, a motoring scale charge is paid based on the CO2 emissions regardless of the mileage.

The driver has two options regarding VAT on private travel:

1. Paying the fuel scale charge and adding the amount to Box 1 on the VAT return

2. Reimbursing the business for private trips, but the business will need to bill the driver for the total each quarter plus VAT at the standard rate (17.5%).

Generally, the first option is favourite with most clients.

HM Revenue and Customs has put the brakes on treating a bike or scooter the same as a car and let’s freelances, contractors or the self employed count them in the same way as other business equipment.

That means that the total purchase cost for a business of a bike or scooter is written off as a 100% allowable business expense under the annual investment allowance.

The allowance or AIA is the new way for a business to claim capital allowances for plant and machinery valued up to £100,000 per year. The AIA was introduced in the 2009 Budget and only applies to two-wheeled transport bought since April 6, 2009.

For top rate taxpayers, this means at least a 40% saving on the cost of a new machine, because of instead of handing hard-earned cash over to the tax man, the money stays in the business and goes towards the cost of the bike instead.

Investing business profits in a new Honda CBF1000 costing £6,821 brings the price down to £4,093 for 40% taxpayers.

Businesses that benefit the most or town and city freelancers who don’t have to carry around a lot of tools, stock or equipment. They can save on fuel and parking at the same time as enjoying their ride instead of sitting in traffic.

Don’t forget that if you have more than one bike or scooter, the tax man is unlikely to believe they are both for business unless you are in a partnership and do not operate a van or car.

Your business can also set off running costs like road tax, insurance and servicing as a business expense.

The trap is using the machine for private trips. The tax man will chase you for private use and expect you to pay a reasonable amount for the privilege, but if you do your sums before buying, you can check this won’t hit you in the pocket too much.

Keeping good financial records is a cornerstone of tax and business planning. Yardleystar can help with bookkeeping, accounts, tax returns, VAT, payroll and handling HMRC correspondence

Find out more

Pay less income tax while managing HM Revenue and Customs compliance and dealing with tax investigations with the help of our specialist advice

Find out more

Contractors, consultants and freelances trading as a limited company need Yardleystar corporate services to manage the strict tax and Companies House requirements for directors

Find out more

Companies and individuals registered for VAT need to keep on top of bookkeeping for quarterly returns and to make sure the right rules and VAT rates are applied.

Find out more