Steven Mugglestone

The more I learn, the less I know

Tax increases for 2012 already on the books, a brief reminder:

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Tax increases for 2012 already on the books, a brief reminder

I am sure that we will have a go at making some predictions for the 2012 budget, as most accountants do, as most of the changes will get leaked well before the budget.  We will not, however, try and make comments on the economy, as most tax accountants try to do, despite them neither having qualifications in economics, nor having actually managed or run a business.  We will stick to reporting the facts and this, accordingly, is a reminder of the tax increases or increased powers of HMRC to raise penalties and fines etc., that have already been put in place and will be implemented post April 2012, despite what may or may not be announced in the March 2012 budget speech.

This is perhaps the opposite and balances out our article, “Top Tax Tips for 2012, without moving to Switzerland.”

HMRC increase and strengthen penalty regime

See, “HMRC seeking 100% penalties for late Tax Returns, resistance is useless & the world recession is not an excuse for having no money”

HMRC powers to prevent deliberate non-payment of PAYE
From 6 April 2012, HMRC will hold additional powers enabling it to ask employers to pay a security where there is serious risk that they will not pay their Pay As You Earn (PAYE) tax deductions or Class 1 National Insurance contributions (NICs).  This will not affect employers who pay their tax on time and in full, and it will not be used for employers who are having genuine problems settling their liabilities.

HMRC has confirmed that it will only use this power to tackle employers who deliberately try to defraud the Government, and will calculate the amount of the security on a case by case basis depending on the amount of tax at risk, the previous behaviour of the employer and other risk factors.  The required security will usually be either a cash deposit from the business or director or a bond from an approved financial institution which is payable on demand.

Daily penalties increased to up to £1,000
Finance Act 2011 introduced legislation, effective from 1 April 2012, to increase daily penalties for failures to comply with a written request for information from HM Revenue & Customs (HMRC) or deliberate obstruction of an officer of HMRC in the course of an inspection.

Currently, a flat-rate penalty of up to £300 may be applied for failure to comply with an information notice, or deliberate obstruction. Additional daily penalties, of up to £60, may also be imposed if the failure persists.  With effect from 1 April 2012, however, where the failure continues for more than 30 days from the date on which the information notice was issued and if it is believed that the current £60 daily penalties will be insufficient to encourage compliance, HMRC will be able to apply to the tribunal for increased daily penalties of up to £1,000 to be imposed.

Where the increased penalties apply, HMRC must issue notice of the amounts imposed, and the date from which they apply.

Capital allowance amounts falling
Rates of writing down allowances will be reduced, with effect from 6 April 2012 for unincorporated businesses and from 1 April 2012 for companies, as follows:

  • Main rate pool will be reduced from 20% to 18% per annum
  • Special rate pool will be reduced from 10% to eight per cent per annum

Where a chargeable period straddles 6 April 2012 for unincorporated businesses and 1 April 2012 for companies a pro-rated hybrid rate should be used.  Reducing the rates of writing down allowances will mean that businesses continue to receive full tax relief to reflect the depreciation of plant and machinery assets, but over an extended timeframe.

The annual investment allowance (AIA) will also decrease from £100,000 to £25,000 from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses, with the rules for periods straddling 1/6 April 2012 involving apportioning the AIA on a pro-rata basis including limiting expenditure after 1/6 April 2012 to £25,000, appropriately time-apportioned. Consideration should be given to the timing of any capital expenditure during the period which straddles the change, and it may be advantageous in some cases to amend an accounting period in order to secure the maximum AIA available.  These measures were included in Finance Act 2011.

Short life asset lives doubled (perhaps positive with a sting in the tail)
The 2011 Budget included the announcement that the period to which a short life asset election applies is to be doubled, increasing from four to eight years.

This change will allow businesses to allocate assets which they expect to sell or scrap within eight years (rather than four) to a single asset pool, and ensure that the capital allowances available to them over this period will be equal to the net cost of the asset.

Although this appears to be a positive step and may provide a cash flow benefit to businesses, the additional record keeping required by allocating each relevant asset to a single asset pool is likely to create a significant administrative burden and cost.  Many businesses, therefore, may choose not to make the voluntary election.  This measure was included in Finance Act 2011 and applies to expenditure incurred on or after 1 April 2011 for the purpose of corporation tax, and 6 April 2011 for the purpose of income tax.

Landfill tax rates increasing
Legislation was introduced in Finance Act 2011 to increase the standard rate of landfill tax by £8 per tonne to £64 per tonne for disposals made, or treated as made, to landfill on or after 1 April 2012.

The Government had previously confirmed that the standard rate would rise by £8 per tonne on 1 April each year up to and including 2014. Also, that it will not fall below £80 per tonne from 2014/15 to 2019/20.  A lower rate of landfill tax applies to less polluting wastes listed in a Treasury Order. The rate is currently £2.50 a tonne and this rate will remain frozen in 2012/13.

Keep watching this space

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

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Written by Steven Mugglestone

February 20, 2012 at 7:41 pm

Posted in Budget, HMRC, Tax

Tagged with , ,

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