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August 2012

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To August’s Tax Tips & MYOB News, our newsletter designed to bring you tax tips and keep you up to date with issues about MYOB.

If you need further assistance just let us know or you can send us a question for our Question and Answer Section.

Please contact us for advice in your own specific circumstances. We’re here to help!
August 2012
· Tax Relief up to 78% for new company investors
· Online VAT Filing Reminder
· Restricted Losses Ahead
· Tools and Guides on the Simple Accounting Website
· August Question and Answer Section
· August Key Tax Dates
Tax Relief up to 78% for new Company Investors
We’d like to take this opportunity to remind you of a brilliant new tax break for business investors, available since April 2012.  If you’re currently looking for an alternative investment, are these schemes worth waiting for?

Raising the stakes
The Government has built on incentives available for several years to help new businesses looking for investment.  The outcome is a very attractive tax break for investors. Why settle for 4% on a deposit account when by taking a risk you can be guaranteed 50% by the Government?  

Existing EIS schemes
The new tax break will be based on the existing Enterprise Investment Scheme (EIS) but with some important differences.  Currently, by putting money into an EIS company you’ll qualify for a credit against your tax bill equal to 30% of what you invested.

Plus you can, subject to certain limits (see The next step), defer tax that would have been payable on capital gains up to the amount you invest in an EIS.  Any growth in value is usually CGT-free. To top off this package, EIS shares can qualify for business property relief, meaning they are free of any potential IHT charge. 

New EIS schemes

The new Seed EIS (SEIS) goes even further. The
SEISs have been available since April 2012. They give all the breaks available to existing EISs. But instead of a tax credit equal to 30% of your investment you’ll get 50%. This applies whether you pay income tax at 20%, 40% or 50%. It makes no difference.

There is also a special one-off CGT break for those who make gains in 2012/13 and invest those gains in a SEIS. The CGT won’t just be deferred, it will be permanently reduced.  This means the net cost of SEIS investments can be reduced by tax reliefs worth up to 78% of the money you put in.  This is generous, but note that there’s a cap of £100,000 on the amount you can invest per tax year. 

By making a sale of assets since April 2012 and investing the proceeds in a SEIS, you can wipe out the CGT you would have otherwise needed to pay.

Example.  In August 2012 Jim’s portfolio of shares contains investments which show a capital gain of £30,600.  The tax on this would be £5,600 (gain £30,600 less his annual exemption of £10,600 leaves a chargeable gain of £20,000 x 28% CGT = £5,600).

Jim invests £20,000 into a SEIS.  He’ll pay no CGT and he’ll receive a credit against his income tax bill of £10,000.  The net cost of his £20,000 investment is only £4,400.

Trap.  EISs are potentially risky investments and SEISs will be more so because they will only apply to start-up companies with net assets of no more than £200,000 before they receive SEISs funding.  And a company isn’t allowed to receive more than £150,000 in SEIS money.

Spreading the risk
Investment companies such as Close Brothers, Matrix and Octopus, to name just a few, developed EIS schemes to spread the risk and so make them more user-friendly to small investors.  It’s too early to say whether they’ll do the same for SEISs but we wouldn’t be surprised. 

To find out more see the helpsheets on EIS’s on our website (Note you have to login to our site see these).

Based on article that originally appeared in Indicator Tips & Advice.  

Online VAT Filing Reminder top
Restricted Losses Ahead top
Have you signed-up with the Tax Office to submit your VAT returns online, or agreed that we will do this online filing for you? If neither applies then you will shortly receive a letter from the Taxman reminding you of your online filing obligations. Almost all VAT businesses are now required to submit their VAT returns online for periods starting on and after 1 April 2012. The only exceptions are for:

– those who are subject to insolvency proceedings; or
– where the person is a practising member of a religious order whose beliefs are incompatible with the use of electronic communications.
Read More
A lot of businesses have made significant losses in the current recession and will continue to make losses for a while yet. Where those losses are made outside of a company they can generally be set-off against the entrepreneur’s other income, or in some cases their gains, without limit. There are restrictions on the use of losses made from a business where the trader is not actively involved. Losses are often created by the amount of interest the business has to pay to the bank.

From 6 April 2013 the Government is proposing to cap the amount of loss relief and interest relief given in any one tax year to the higher of:

– £50,000; and
– 25% of the taxpayer’s income. Read More
Tools and Guides on the Simple Accounting Website
August Question and Answer Section top
Are you aware of how much detailed information we have on our website to help you with accounting and tax questions?
Here are some examples.

You can calculate your payroll through our website.  You can enter different tax codes pay rates and periods.  Why not take a look at our
Payroll Calculator

Improving Profits
Perhaps you would like to advice on how to increase profits. Have a look at this Profits Calculator
One of our clients has profits of £190k. The guidance from the website tool shows that by:
– Reducing overheads by 10% they may be able to increase their profits by £25k.
– Increasing volume of units sold by 10% they may be able to increase profits by £43k
– Increasing prices by 10% they may be able to increase profits by £120k
– Increasing volume of units sold & prices by 10% they may be able to increase profits by £175k
– Increasing prices by 10% means they make the same profit as before even if they lose volume of 22%
– Decreasing prices by 10% means they make the same profit only if they increase volume by 39%. 

Reclaiming NI when you have staff sick and on maternity
One of our clients employs twenty people.  We recently had to calculate the amount of National Insurance recoverable for a number of their staff who had either taken maternity leave or statutory sick pay (SSP). The amounts recoverable from your National Insurance bill depend upon the size of your business the amount of National Insurance (NI) paid every year and the proportion of that paid in SSP. It is not easy to use the formal rules to work out how much to claim.  Therefore on the website we have provided a link to a calculator that will do this for you:
Payroll and PAYE Returns

Other advice and tools
At the Simple Accounting website you can find a wide variety of advice and calculators such as this.  Please have a browse and let us know if there is anything particular you cannot find, would like to see or need to get further guidance on.

Q. Our company is owned jointly by myself and my wife, and we are both directors of the company. I do most of the work and draw a lot of funds out of the business, so my director’s account with the company is often overdrawn. My wife has another paid position, so doesn’t draw so much from the company. Her director’s account with the company is always in credit. Can our two director’s accounts be combined and set-off against each other for tax reporting requirements?Answer

Q. My company is doing well and I’d like a new car, possibly a BMW series 5. Should the company lease or buy this car, or does it make more sense for me to take a dividend from the company and to buy the car personally? Answer

Q. I want to buy a new business but the only way I can do that is to increase the mortgage on my house. Will the interest I pay on the extra mortgage be tax allowable for the business? Answer
August Key Tax Dates top
19/22 – PAYE/NIC and CIS deductions due for month to 5/8/2012
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other MYOB or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, or Clearbooks. We offer a range of accountancy services despite being specialists.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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