HMRC’s new IT system is continuing to generate widespread 2010/11 PAYE code errors. We have already received multiple Notices of Coding for the same client, in the same envelope. It is going to take some time for them to resolve the situation and it is possible that the errors will not be corrected in time for the start of the new tax year. HMRC’s advice if you think there is a problem with your tax code is as follows:

‘You should check your tax code using the guidance included with the Coding Notice and on our website. If you think that it may be incorrect or if you do not understand an entry on it, please telephone us on the number printed on your Coding Notice or 0845 3000 627 so we can make sure you have the right tax code applied in time for the beginning of the new tax year.’

If you pay your tax late HMRC will charge interest from the date the tax was due until your payment is received.

If you still haven’t paid your balancing payment (due on the 31 January) by 28 February, you may be charged a 5 per cent additional charge, called a surcharge, on top of the amount you still owe. This is in addition to any interest you’ve been asked to pay.

If you still haven’t paid all of the tax due on 31 January by 31 July, you may be charged a second 5 per cent surcharge on top of the amount you still owe.

Doing nothing can become very expensive, so act now.

Some people panic when they realize the 31st January deadline is nearly upon them; others freeze, not knowing what to do; while some just take it in their stride and accept the inevitability of the £100 fine. However, it is never wise to just accept that your tax return will be late, for two good reasons:

· Late tax returns give rise to an increased risk of an HMRC investigation into all your tax affairs
· The deadline from which HMRC can launch an investigation is also extended when the tax return is filed after the deadline

Given that the new regime of compliance checks and penalties is now well under way, we would recommend that this is a risk that is wise for you to avoid if at all possible. There is still time before the deadline to save yourself the £100 penalty. But act now! Time really is running out.

If you are still struggling to apply the new VAT changes, then there is some useful information on the HMRC website. You need to think about when the service or supply was made but check the guidelines to ensure you get it right. Remember too that the rates on the VAT Flat Rate Scheme also changed on the 1st January 2010, so remember to check your new rate if you are on the FRS.

Have a very Happy Christmas and a prosperous New Year.

The most common question we get asked by start up businesses is whether it is best to trade as self-employed or through a limited company. Rather than offer blanket advice, we prefer to consider each person’s situation individually. The best answer for you might not be the same as for a friend whose circumstances are different to yours. It can be expensive to make a mistake and so obtaining good advice at the start of the business is very important.

Here are some initial questions you may want to consider:

· Are you involving other investors who will own shares?
· Are there risks to mitigate that cannot be covered by insurance?
· Are there tax advantages for you in taking a mix of salary and dividends?
· Is it necessary to incorporate in order to compete in your business sector?
· Do you want to appear larger than you actually are?

Your answers to these questions will begin to guide you as to whether trading through a company might make sense for you. But remember that the level of administration as well as your costs will increase so it needs to makes sense for you (and not just your accountant). And you can always start as self-employed and incorporate once the business starts to trade more successfully.

If you want to discuss your situation then please do get in touch so we can advise you before you have committed yourself to a particular course of action.

Come and see us at Business Start-Up 2009 in London on November 26th & 27th. If you would like a FREE ticket to the event, simply email info@hfmtax.co.uk and we will send you the number you want. We will be running a seminar entitled the Essential Guide to Tax & Accounting at 11 am in Seminar Hall 5. Hope to see you there.

New valuations for Business Rates should have been arriving in the post over the last month and any inaccuracies need to be appealed by 30th November 2009. If you want to check your valuation, you can do it online by going to the Valuation Office website. Don’t delay though, as this valuation is the basis for business rates over the next five years. It is also worth checking with your local authority if you are entitled to a Small businesses rate reduction of up to 50%. A search on their website ought to be able to give you all the information you need to apply. Here is a sample for our local authority, Lewisham. It’s just one simple form and not completing it will cost you money if you are eligible.

If you still have an outstanding 2008/2009 personal or partnership return yet to be submitted, there are two deadlines that may be relevant to you. Paper tax returns must be submitted before 31st October and HMRC have made clear their position regarding delays due to the postal strike which, as we expected, does not much room for delay. However, if you are an HfM client, your tax return will be submitted electronicaly and so you will have until January 31st for the return to be submitted.

Do you owe an outstanding tax payment? HMRC have published new interest rates that apply to both money taxpayers owe in tax and money owed by HMRC. It will come as no surprise that the penalty for underpayment (now at 3.0%) cotinues to outweigh the benefit for overpayment (0.5%). The new rates apply from 29th September apart from that applying to quarterly Corporation Tax payments which changed on 21st September.