October Question and Answer Section

Newsletter issue - October 2011.

Q. My café was badly damaged in the recent riots, but my loyal customers have collected £3,000 to help me open the business as quickly as possible. How should I treat this sum for tax purposes? Is it a personal gift, or a contribution to be set against my repair costs?

A. The taxman would view that this gift from your customers should be treated as income for your business for income tax or corporation tax purposes. You are likely to have a lot of repair expenditure to set against your income for the current period, so you may well not have a profit to declare even after including the gift as income.

Q. I've received a tax refund for 2010/11, but I'm worried that it's not correct as I usually have tax to pay each year. Also I haven't even submitted my 2010/11 tax return yet.

A. You are right to be worried about the tax refund, as the Taxman's computer has issued some incorrect refunds recently. If you normally complete a self-assessment tax return but also have some income taxed under PAYE, the computer should wait until your tax return has been submitted before calculating the tax to be refunded. In a few cases this has not happened, and the tax refund has been based only on the taxpayer's PAYE income. Please ask us to check the tax calculation that should have arrived with your refund cheque.

Q. The Tax Office has written to me saying £2,800 tax I owe will be collected by restricting my PAYE code for 2012/13. What does this mean?

A. The Taxman is now permitted to collect up to £3,000 of unpaid tax or overpaid tax credits through PAYE codes. Your PAYE code tells your employer how much of your income to treat as tax free, and thus how much tax to deduct from the rest. A common PAYE code for 2011/12 would be 747L, which gives you tax free income of £7,475 for the year. If you owe £2,800 in unpaid tax, and your highest marginal tax rate is 40%, your tax free income will be reduced by £7,000 (£2,800/ 40%), leaving you with tax free income of £475 and a PAYE code of 47L. The numbers will be slightly different in 2012/13, but essentially you will pay more tax each month from April 2012 until the tax debt is eliminated.

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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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk