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Are You Declaring Commissions?
Newsletter issue - January 2010.
Insurance companies often pay commissions to professionals who recommend certain insurance policies to their clients. For example; hospital consultants may recommend health insurance, vehicle dealers may propose car insurance, and lawyers may put forward accident and legal cover. The professionals in these situations should report any commissions they receive on their tax returns, but sometimes they forget to do this.
The Taxman now has wide powers to ask for information about a person's tax affairs from third parties. He can issue a notice to an insurance company asking for a list of all persons who receive commissions in a certain period, and the amounts paid to each individual.
We understand that HMRC has recently issued several such notices to a number of large insurance companies. When the information requested in these notices is received, the Taxman is likely to open enquiries into the tax affairs of a number of professionals.
If you have received some commission, however small, and you failed to disclose that amount on your tax return, now would be a good time to come clean. If you make a voluntarily disclosure to HMRC, you could benefit from a reduction in the penalty due from 30% of the tax due, down to nil. However, this penalty range (from 0% to 30%) will only apply if the Tax Inspector judges the omission from your tax return to be careless. In most cases the Taxman will view the under-declaration of commission to be a deliberate error, in which case the minimum penalty will be 20%, and the maximum 70% of the understated tax.
Please speak to us before you contact the tax office about any under-declaration of income, as the way in which you present the information to the Taxman can influence the amount of penalty charged.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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