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April Question and Answer Corner
Newsletter issue - April 07.
Q. I deal in small electronic goods such as Sat Navs, CD-players and DVD players. I heard there was something in the Budget that could affect my business. Can you explain please?
A. This is to do with special powers the VATman has to demand from you any unpaid VAT arising in your supply chain. From 1 May 2007 the type of goods that can trigger the use of this power is expanded to include electronic items that may be owned by individuals and used by them personally for leisure, amusement or entertainment, and this would include Sat Navs and DVD equipment. To avoid the VATman asking you for extra VAT be sure to carry out reasonable checks to establish the integrity of all your supplies, supplier and customers. If you are concerned that you could be caught up in deals that deliberately under price the goods on offer, please talk to us without delay.
Q. I am a contractor and I work through a managed service company. The organisation that runs this company wants to transfer me into a new personal service company to avoid the Budget tax changes. Will this work?
A. Probably not if there are no other major changes in how everything is organised and run. Your new personal service company will be treated like a managed service company where the provider controls aspects of the personal service company such as the finances, the payments made to you out of that company, or how you find your next contract. The payments to you from the personal service company will have to have PAYE deducted from them after 5 April 2007, even if they are called "dividends". You will also no longer get a deduction for your travelling expenses. For more advice on how you could structure your own personal service company with a view to avoiding both the new MSC legislation and IR35 please talk to us.
Q. One of my employees has just told me she is pregnant and says I have to give her a full year off work. Is this true, and do I have to pay her for all that time as well?
A. Your employee is correct, she is entitled to up to 52 weeks of statutory maternity leave, but this leave is not necessarily paid leave. You only have to pay her Statutory Maternity Pay (SMP) while she is on maternity leave, if she has been on your payroll for at least 26 weeks, including the 15th week before the baby is due. The SMP also doesn't last for the full 52 weeks, it currently can only be paid for up to 39 weeks. This has increased from 26 weeks for babies due after 31 March 2007. The SMP is also not paid at the employee's full wage rate. The first six weeks are paid at 90% of her average weekly wage and the rest of the period is paid at a flat rate of £112.75 (from 6 April 2007). As a small employer you can claim back from the Taxman all the SMP you pay out, plus an extra 4.5% as compensation for the employer's class 1 NIC you have to pay on the SMP.
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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