StartUp Britain – subsidised loans for new businesses

On 28 May 2012 the Department of Business launched a subsidised loan scheme through StartUp Britain.

Anyone living in England who is aged between 18 and 24 is eligible to apply for a loan of up to £2,500.

You will need to prepare a business plan.

As well as the loan, applicants receive business support and mentoring and a free copy of the StartUp Loans Kit, which offers the guidance you need to start a business plus over £500-worth of offers on products from business cards to websites, netbooks and work suits.

There’s a internet forum where you can discuss issues effecting your new business with other people who are in the same situation or have already set up their own businesses.

North Devon’s StartUp champion is Mike Lillis. More information is available on his website.

National and local special offers for start-up businesses are available in the StartUp Britain marketplace.

Remember that as members of the ICAEW Business Advice Service, we offer free initial consultations to business start-ups.

As ICAEW Chartered Accountants, we can give you expert advice on how best to plan, start, manage and grow your business.

Buying and selling goods online

The latest round of HM Revenue & Customs’ campaigns against tax evasion is the e-markets Disclosure Facility. This targets taxpayers who should be paying tax on income they earn from buying and selling goods direct to others using online marketplaces like eBay.

If you have been selling goods online you need to decide whether it constituted trading and whether you should have included the associated income and expense on previous years’ tax returns.

If you do need to disclose trading activity, as a first step you should notify HM Revenue & Customs of your intention to make a disclosure by 14 June 2012.

You can do this by completing an online notification form.

An actual disclosure, together with an arrangement to make payment of all tax, interest and penalties due must be made by 14 September 2012.

Making a disclosure using the e-Markets Disclosure Facility can greatly reduce the amount of penalties due and should avoid the possibility of criminal investigations taking place. Most disclosures will be subject to a maximum penalty of 10%.

If you’re concerned that you might have been trading online and might need to make a disclosure, then contact us today to discuss your situation.

Get your VAT back on debts

It’s bad when a customer takes a long time to pay you, or doesn’t pay you at all. It’s even worse when you’ve already paid the VAT due on the sale over to HM Revenue & Customs. Of course, you’ll get the VAT back if the debt goes completely bad, but how long do you have to wait and could you avoid paying it in the first place?

VAT due on sales is usually accounted for on the return covering the date of issue of the sales invoice. If a customer fails to pay that will leave your business out of pocket. However, at least you can reclaim the related VAT you have paid.

You can reclaim VAT on an unpaid sales invoice if all the following conditions are met:

the VAT has been included on an earlier VAT return
the debt in question is more than six months overdue for payment
the invoice(s) have been written off as bad debts in your business accounts.

Assuming the conditions are met, you can recover the VAT originally paid by adjusting your next return.

You should add the VAT element of the bad debt to the input tax figure in Box 4.

The VAT you can reclaim is the amount you charged on the original sales invoice.

Bad debt relief can be obtained automatically by adopting the cash accounting scheme. Normally you would have to pay the HM Revenue & Customs the VAT on any invoice you issue whether or not it has been paid. The cash accounting scheme allows you to defer handing over the VAT until you have been paid by your customer. Please contact us to see if your business is eligible.

What happens if the customer later pays you?

If you have claimed back VAT using the bad debt relief rules, but subsequently receive a payment from your customer, you should treat the payment received as VAT inclusive. You must repay the bad debt relief to HM Revenue & Customs on the return that covers the payment date.

The bad debt relief rules work both ways. So if you have reclaimed VAT (input tax) on a purchase invoice which is more than six months overdue, you must repay the VAT you have claimed on this invoice by adjusting the entry in Box 4 of your next return. However, when you do eventually pay your supplier, you can again claim the VAT as input tax in the usual way.

Reducing the income tax you have to pay on 31 July

If you are in the self-assessment tax system then you may be due to pay your second Payment on Account for the year-ended 5 April 2012 by 31 July 2012. That’s just under two months away.

Dependent on you circumstances, it may be possible to reduce that payment, or avoid it all together.

If any of these apply to you, then we can look at reducing your payment:

1. If you have done your tax return to 5 April 2012 and the actual liability is less than the previous year.

2. You do not need to make a Payment on Account at all if the tax liability on the 5 April 2011 tax return was less than £1,000, or if at least 80% of the tax due for 2010/2011 was paid at source.

3. If you have not done your 5 April 2012 tax return but expect the liability to be less than it was last year, then you can ask the HM Revenue & Customs to reduce the Payment on Account. But beware, if you should have paid the original amounts after all, you will have to pay interest and possibly penalties if HM Revenue & Customs think you didn’t have a good reason to reduce the payments.

4. It is too late to make pension contributions for the year to 5 April 2012, but if you have made a loss in a business since 5 April 2012, you may be able to carry those losses back to the 2012 tax year and reduce the tax liability and payments. Note that this applies only to sole trader and partnerships (including LLPs), NOT limited companies.

Notes

• The tax rules state that you must pay an estimate of your tax liability for the year to 5 April 2012. Half is payable on the 31 January 2012 and the other half on 31 July 2012.

• The total amount you have to pay is equal to tha actual liability for the year to 5 April 2011, although if the total liability for that year was less than £1,000, you don’t have to make any Payments on Account.

• Once you have worked out your actual tax liability to 5 April 2012, you can get an immediate refund of any overpayment (with interest). Any balance payable over and above the Payments on Account does not need to be paid until 31 January 2013.

• The Payment on Account applies only to income tax, not to any Capital Gains Tax (that’s payable on 31 January 2013).

• If you have done your 5 April 2011 tax return and you are due to make a Payment On Account on 31 July 2012, you should have been sent a payment reminder with a payslip by HMRC in late June/early July.

• Details of how to pay your Income Tax liability can be found on HM Revenue & Customs website.

• If you pay late, you will be charged interest.

StartUp Britain – subsidised loans for new businesses

Buying and selling goods online

Get your VAT back on debts

Reducing the income tax you have to pay on 31 July

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