EMTACS
Entertainers and Musicians Taxation & Accountancy Services
69 Loughborough Road, West Bridgford, Nottingham, NG2 7LA
Phone 0115-981-5001 Fax 0115-981-5005

Recent News

click here to go back to the current '02 newsletter

The Spring 2001 Newsletter is out and about, and is posted here in case you haven't received it. An index of the articles appears below - click on an article and you will go to it, then click on "top" to return here.

Bye Bye Hector | April 2001 News | Account Payments, New Pension System | Children's Tax Credit | 2001 Billing Policy | Letters of Engagement | Earlier Books Please! | N.I. Bills and Issues | Starting Up | Lunches | FPCS - A New Way To Claim For Motoring Costs | Legal Responsibilities | Underpayment Coding | Come In Number 6!

BYE BYE HECTOR top

The Revenue have decided to abandon Hector as a logo, on the basis that he is seen as not representative of the men and women who work in the Inland Revenue. This is about as daft as they get. Did anyone seriously think of Hector as a typical Inspector? Everyone hated Busby, the inane bird who promoted BT, but even though he disappeared from our screens over 10 years ago, sad old fools like me can remember him.

Nobody knows yet how the Revenue will replace Hector but I hope they don't try putting a typical Revenue employee on the front of everything, if only for the sake of people opening their post. No-one wants a shock like that first thing in the morning.

APRIL 2001 top

Once upon a time we used to send out what we'd call a Budget Newsletter, containing hot news from what the Chancellor of the Exchequer had said in Parliament. Times change and when Gordon Brown stood up to deliver his Budget speech there was practically nothing said that hadn't already been previously announced or extensively leaked. A few tweaks to the system to reduce tax for those with very small liabilities, a further move to make matters better for families with kids under the age of 16 and a longer term plan to increase allowances for those whose babies are born after 6/5/02.

But we do need to communicate to clients about things that are changing, about plans for dealing with the coming year and about matters that need to be brought to your attention.

There's relatively little change to the way in which an 'ordinary person' is taxed. Rates go up for inflation mainly, but with higher than average adjustments to the 10% tax band and some changes at the top end of the National Insurance system…

There is a possibility of changes in the VAT system being introduced which would work to the benefit of quite a few clients. Customs & Excise are planning a scheme that would enable everyone with a turnover below £100,000, to pay tax on the turnover and not have to reclaim their VAT on every single invoice. This could be very good since it would reduce irritating bookkeeping (although you'd still have to hang on to all the receipts for doing the accounts) but it depends how they draw up the scheme. More details are promised in the Summer.

Savings: Those with money in ISA's may like to know that the limit of £7,000 investment has been changed from a temporary measure to something that is semi-permanent. You will be able to put that much away for each year up to 2005/06, giving the affluent amongst you the chance to put away a sizeable amount in tax-free savings.

A higher level of Childrens' Tax Credit will be available for the 12 months following the arrival of a new baby in your house. This will be £20/week, double the current figure, but sadly for those who already have a new baby, this scheme doesn't come in until April 2002. Mind you, the idea that new-born babies are more expensive than teenagers is the sort of nonsense you might expect from a Chancellor who is newly married and has no children.

Coming in from April 2001 is a newer, more generous system of Taper Relief, a system that reduces the impact of Capital Gains Tax for assets you've held for a while. If anyone is in this position, call us for more details.

PAYMENTS ON ACCOUNT AND THE NEW PENSION SYSTEM top

CHILDREN'S TAX CREDIT top

There is another change to tax bills for 2001/02 that works in the other direction. If you are someone with kids in the house under 16 you will be entitled to claim the Childrens' Tax Credit. Following the budget this is now worth £520 per year off your tax bill. It's meant to be a replacement for Married Couples Allowance, which of course went away last April. Thus if your circumstances are fairly similar from one year to the next then you will owe £520 less for 2001/02 than for 2000/01 and your payments on account will be too high during 2002 with the benefit coming back to you in January 2003.

If you're confident of your circumstances you can always ask for the payments on account to be reduced so as not to overpay the Revenue, but you should be careful about this because you'll owe the Revenue interest if you turn out to be wrong.

Of course it does mean it will be a long time before a self-employed person gets the Childrens' Tax Credit when compared to someone who will under PAYE, start to receive it next month. One solution to this is available to those whose spouses/partners happen to be dealt with under PAYE because either of you can have it.

Again there's a different rule for those who are Higher Rate taxpayers. If you (or your partner) pay more than £3-4,000 at 40% then you will lose your entitlement to Childrens' Tax Credit. People who just nose into the 40% band would be well advised to do something about it. Because of the way the system works, if you or your partner/spouse find yourself with taxable income in the early-mid £30,000's, you will be able to get good value out of payments into a pension scheme. People in these circs who pay an extra £100 into a pension will reduce their tax bill by £47. Talk to us if you think that might be the case and we'll explain more.

BILLING POLICY 2001/02 top

Those of you who do their accounts in the neat, tidy and appropriate way are probably bored by our nagging people about the way in which we'd like to receive them. Even some of those whose books are apparently good can be flawed and we are never quite sure if the rattier material we get is like that because you are too busy, too scatty or just don't know quite the best way to go about the task.

So, we are preparing something to try to encourage you all along the path of righteousness. If you know our warped sense of humour then you'll not be surprised to know that the working title of this is the Idiot Pack. No offence intended - but the intention is that for those whose accounts material shows a need - we'll send them a copy of this to show more clearly the methods by which perfectly decent sets of books can be maintained with precious little effort.

One thing that marks us out from other accountants is that we're willing to work with the most unpromising material to try to produce accounts. Many firms would simply send back some of the stuff we receive with instructions to get the books in order. I don't want to go down that road but we will be more inclined to charge an economic price for the time spent in sorting out stuff for those people who are simply allergic to book-keeping.

LETTERS OF ENGAGEMENT top

Enclosed with this newsletter is something you've not seen before (from us). It's called a Letter of Engagement and those of you who have had other accountants may have seen these things before. It's something that lays out the ground rules for our working on your behalf, who is responsible for what and similar. It doesn't actually change anything. It merely lays down in black and white the way in which we plan on acting for you and ensures that you are clear on things.

EARLIER BOOKS PLEASE! top

It's time for the annual nag for a prompter receipt of the raw material for clients' accounts. This year we have a new record high of people whose Tax Return didn't go in and who will have fines to face as a result. Some of this we put down to the fact that people now know that the Revenue don't arrive at the door with cattle prods on 1st February. They simply send out a £100 fine and if you have a chunky £5,000 tax payment to make then by hiding under the duvet for a few weeks longer, you don't have to face up to things. Then when you do get to face the music, what's £5,100 as against £5,000?

The major reason for non-submission of the Returns is the non-arrival of raw material to produce accounts. We send out cashbooks, send out gentle reminders and ring/nag at people, which ensured a steady flow of material right up to the end of January. But we need to try to encourage people to get their books to us in May, June and not December and January. One person I spoke to provided me with a number of reasons why it was all so last-minute. The computer had broken-down, the cat got run over, they had an ingrowing toenail etc etc. But under pressure we agreed what the real reason was.

It's a horrible job and, as with all horrible jobs, you put off doing it for as long as possible and only attack it when you really really have to. So if you put it off until Christmas and then are ill for a fortnight, you're stuck with a bit of a problem.

But as with all horrible jobs, the amateur psychologist in me will remind you of how much better you feel when you have done it. If any of you do regular exercise classes, think of the difference between the "don't want to go" feeling and the "glad I went" mood which follows after you do pull your finger out. And so it is with doing the books. Do it sooner and you'll feel so much better. Do it later and you'll feel guilty and it'll just make things seem even worse.

That's the carrot, here's the stick. We mentioned at the start of last year that we'd be levying a surcharge of £10-20 on those whose books and records came in after 5th November. In the end this turned out to be us putting a further £5 onto bills for those whose stuff came in after that date. This year we're going to adopt a different tack and charge a premium that's very clear, so everyone knows where they stand.

Note the use of that magic word 'received'. One inventive client told us that they weren't having their fireworks night last year until Nov 9th and that this was why no surcharge should be levied! Sheer admiration for this line probably meant we let them off, but this year 'received' is the word.

NATIONAL INSURANCE BILLS AND ISSUES top

Overall our bill levels for accounts in good order and for Tax Returns will not be greatly changed this year - a bit up for inflation, but a little down because of a minor adjustment which we plan on making. For years we have been taking the costs of administering National Insurance deferment and absorbing them into the general costs. Henceforth when we do a Tax Return for someone who has NI deferment, a fairer chunk of money for the time involved will be added to that bill rather than being shared out across the board.

On the subject of NI, it has become increasingly important for us to be able to check on the amounts of National Insurance that have been taken from people's wages. These contributions can very easily go astray or you are simply not credited with the money taken off your wages. It's not that many years back that London fixers would be in the habit of taking NI off people's wages and then not handing it on to the authorities. So when you get a payslip, make very sure you keep hold of it and that it finds its way to us along with your accounts so we can ensure that full credit is given.

STARTING UP top

In France if you start up in business as someone who is self-employed, you have to apply to do so, go on training courses, register with the local town hall and, for all I know, donate litres of blood. Then and only then can you start trading. Here we used to do things differently. You start self-employment by taking on a job or a gig and not having anyone bother to take tax off you. Until recently the Revenue weren't too stroppy if you didn't bother to tell them for a couple of years. However this has become stricter.

For tax purposes the rule is now to tell the Revenue by 5 October in the tax-year after the one in which you began self-employment. So start today and you have to tell them by 5 October 2001. But with effect from this January a new set of rules appeared for National Insurance purposes. You have to register for NI by the end of the third month after the one in which you started. So start today and you have to register by 30 June 2001. Fail to do so and you will be fined £100. And of course since registration for NI informs the Inland Revenue as well, their old deadline becomes obsolete.

This sounds mean and indeed it utterly fails to understand the way in which musicians, actors and artists become self-employed. You don't wake up one morning and say "I want to be my own boss", you just get offered £50 to stand-in for someone else in a touring version of Joseph & The Amazing Technicolour Dreamcoat. It has yet to be seen in operation because the system only came in this January and thus anyone who was self-employed before then had to be registered as such by 30 April. Once fines start being levied we will have to see whether they are universally mean or whether there is an element of understanding built in.

However it's one of those things that must be done at some stage and often, sooner is less painful than later, so if you think that you may not be registered, or know someone who has started but not told anyone official about it then get in touch or encourage them to do something (ring us naturally!).

LUNCHES top

The most common single question we get asked by clients about expenses is about eating. Or rather about claiming for the expense of meals and subsistence in general. What's tax deductible and what isn't? There is a legal rule for this, set down 25 years ago. The rule is that if an overnight stay is involved you can claim for the 'reasonable' costs of subsistence. If there isn't an overnight stay then you can't. With some things the system is a bit ambiguous but not here. The tax return is very specific about this and rules it out in black and white.

But there is a potential claim here. Somebody who is working under PAYE and who works away from their normal base is often given something like a lunch allowance by their employer. So long as this allowance is within reasonable limits then this doesn't count as income for the employee. In effect they are allowed to claim the cost of their lunch. A principle of taxation is that you must treat taxpayers even-handedly and this isn't fair on the self-employed who should have the same right to make a claim as well.

Well that's the argument anyway. There are two drawbacks. The amount is pifflingly limited (£4.25/day) and there is no official ruling on this - only the flat statement on the Tax Return that this isn't allowed. So we have been investigating the whole matter with the Revenue. Inspectors we have spoken to are split on the issue, but we do know of instances where Inspectors have accepted the point - or rather that it has been claimed on some tax returns and not been challenged (not the same thing as saying "Yes"). So we are in the midst of taking this whole matter up with Somerset House who will be getting back to us.

In the event that the Revenue concede the point then lunches will be deductible to the £4.25 limit and will be backdated. So if that means 5 years of lunch 200 times a year then that's a back-dated claim of over £4,000 which can be added in. Mind you, you would need to be able to show that amount of lunches were taken. For your own sakes though, I suggest you start keeping a record of the number of occasions when you had lunch out for work reasons, so we can make a decision about this once we have a proper ruling.

FPCS - A NEW WAY TO CLAIM FOR MOTORING COSTS top

There's another bit of the PAYE rules that is trickling into the rules for the self-employed. This is something called the Fixed Profit Car Scheme. This is something that enables employers to reimburse employees for the use of the employee's car on company business without rendering him taxable. There is a scale that dictates a fair amount. For most cars
it's 40p/mile for the first 4,000 miles per year and then 25p/mile. Bigger engine sizes have slightly higher figures, but it tends to encourage you to buy smaller-engined cars.

These amounts can be claimed by the self-employed as well in place of the usual system of claiming for all the motor expenses and then reducing that total for whatever percentage of your motoring is private. This scheme was meant to be reflective of an average car-user's costs. That works to the advantage of a careful driver who drives a cheap car, does his own maintenance, with full No Claims and does motorway driving at a steady 56mph. It works against someone who drives a sporty look car with high insurance, a bad habit of driving into other people and who alternates between London traffic and 110mph along the Westway.

It's now something we look at these days, but the FPCS system can only be adopted when you change cars. So far it hasn't worked well enough for anyone to change over, but a change in the scales has tilted things in favour of those with a small car (engine less than 1,000cc) on environmentalist grounds so the next time you buy a Cinquecento, we'll be keeping an eye on the option to claim motoring costs differently. Better still, call us when you change and we'll advise you on record keeping etc.

LEGAL RESPONSIBILITIES top

There's a subtle shift in the law which came in with effect from January 1st. Once upon a time if you did wrong (in the eyes of the Revenue) then they told you not to do it again and charged you the tax and maybe interest and penalties. Things have changed and now the Revenue have the right, if they choose, to treat particularly wicked people under the criminal law rather than the civil law. That means courts, fines and (in theory) imprisonment are not impossible. Where an accountant is aware of criminality and sends in figures on that basis, they too can be in the firing line. Although this is intended for genuinely corrupt people, it does focus the mind a bit doesn't it?

UNDERPAYMENT CODING top

One interesting change has been made to the way in which tax can be collected from people who have a large enough slice of tax paid through the PAYE system. If people submit their tax returns by 30 September then the Revenue will collect the tax due via a tax code for the following year. Thus any tax you owe for 2000/01 could be collected through your tax code and via additional tax taken by the PAYE system during the 2002/03 year. Two years holiday on paying due tax never hurt anyone.

Previously this treat was restricted to those who wanted to collect less than £1,000 through the PAYE system but this has been doubled to £2,000 - mainly because the Revenue like getting their money this way. No demands, no statements, just a steady flow of PAYE.

To qualify for this you must have your return in by 30 September and have a PAYE source of income with enough leeway to collect the volume of tax. You can't collect an extra £2,000 in tax out of a job that only pays you £250 a year!

COME IN NUMBER 6! top

Long standing clients will be familiar with our efforts to try and recruit a 6th person for the office. Some have come and gone because it didn't suit them. Some have come and gone because they didn't suit us and for some, the feeling has been mutual. However we have recently been joined by Ellie who will be helping Angie and Julie with the accounts side of things. Tax & National Insurance continues to be the province of John and Geoff, while Jane remains on top of things in the VAT department.

Although we continue to be pretty multi-talented (and modest too!), it's usually best to aim for the right person for your query.