According to a recent CBI report UK companies rely too heavily on debt finance. It said that 50% of small and medium sized businesses used bank loans and more than one-third used overdrafts. Of the remainder only 3% use equity finance: the European average is 7%.

 Smaller UK businesses seem to associate equity funding with loss of control. Kaja Hall, CBI chief policy director is quoted as saying:

 “We need to shatter the equity finance glass ceiling and encourage growing firms across the UK to use this largely untapped resource. It’s a myth that using it results in loss of control and decision-making. Equity finance is one of the most effective ways for small and medium-sized firms to access investment capital and there are plenty of investors who take a minority stake.”

 It does appear that UK business owners are drawn to shorter term solutions offered by their banks: overdrafts and loans. The main problem with this sort of short-term approach to investment funding is that in today’s slow moving economic conditions businesses may need to borrow for longer periods in order to achieve their investment and growth goals.

 There is talk that building societies should be given rights to lend to the business community. Perhaps Government could step in to make the present, temporary, Seed Enterprise Investment Scheme a permanent feature of the UK tax system? Time for a rethink. UK businesses need to be able to invest for long term development and the present trend towards short term fixes does not really hit the spot.

 1 February 2014 – Due date for Corporation Tax payable for the year ended 30 April 2013.

 19 February 2014 – PAYE and NIC deductions due for month ended 5 February 2014. (If you pay your tax electronically the due date is 22 February 2014.)

 19 February 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2014.

 19 February 2014 – CIS tax deducted for the month ended 5 February 2014 is payable by today.

 1 March 2014 – Self Assessment tax for 2012/13 paid after this date will incur a 5% surcharge.

 1 March 2014 – Due date for Corporation Tax due for the year ended 31 May 2013.

 19 March 2014 – PAYE and NIC deductions due for month ended 5 March 2014. (If you pay your tax electronically the due date is 22 March 2014.)

 19 March 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2014.

 19 March 2014 – CIS tax deducted for the month ended 5 March 2014 is payable by today.

In a recent tax tribunal case a tax payer was denied Capital Gains Tax relief for the cost of improvements to a property as he could provide no evidence of his expenditure to the court.

The court came to the conclusion that the taxpayer had made improvements and were somewhat dismayed by his inability to provide evidence.

This is a timely reminder that it is not only trading businesses that need to keep documentary evidence. Property owners should also ensure that they keep records of property purchases and sales together with copy invoices or other evidence of expenditure to improve their property.

Employers that provide a company car and pay for the employees’ private fuel create tax, NIC and administrative issues for both parties.

1. Employers will be liable for Class 1A National Insurance charges on the taxable benefit created by the provision of the car and payment of private fuel; unless the employee fully reimburses the private fuel costs, and
2. Employees will suffer a benefit in kind charge for the use of the car and the private fuel provided. The car fuel charge can be reduced, or eliminated, if the private fuel costs are reimbursed.

But what happens if the fuel provided by the employer for private use is electricity?

Electricity does not count as fuel for this purpose. So, for example, where an employer enables an employee to recharge his car at work, or at home, and the employer pays the bill, there is no taxable benefit even if the car is available for private use. 

If you are self-employed, as a sole trader or in partnership, and if we assume that your business year end is 31 March, then the profits you earn in the year to 31 March 2014 will form the basis of your tax payments on account for the tax year 2014-15 (unless the year to 31 March 2014 was your final year of trading).

Problems may arise if profits, year on year, fluctuate significantly; either up or down.

Your tax payments as a self-employed person consist of two payments on account and a final settlement on the 31 January following the end of the relevant tax year. For example you will make equal payments on account for the tax year 2013-14 in January and in July 2014. If this is insufficient to cover the total tax and Class 4 NIC due then you will have a top up payment to make in 31 January 2015.

Payments on account are initially based on your Self Assessment liability for the previous tax year – in the above example, the January and July 2014 payments will be based on your actual taxes due for 2012-13.

If your trading profits have not increased or reduced significantly, the payments on account will usually cover tax due and there will be perhaps a small difference, under or overpaid, that will need to be sorted out in the following January.

However, if your profits have significantly increased or reduced, then cash flow considerations need to be taken into account.

If your profits for the year to 31 March 2014 are likely to be higher than the previous year:

In this case any payments on account you make January and July 2014 are unlikely to cover taxes due for 2013-14 and a balancing payment will arise on 31 January 2015.

If your profits for the year to 31 March 2014 are likely to be lower than the previous year:

In this case any payments on account you make in January and in July 2014 are likely to be more than you need to make to cover taxes due for 2013-14 and a balancing overpayment will arise on 31 January 2015. This can be addressed by making an election to reduce the payments on account to a more appropriate amount.

If either of these scenarios is likely to apply to your self-employed business profits, we advise you to have your accounts drawn up as soon as possible after your year end. The tax advantages can be summarised as:

• If your profits have been increasing, you will have the maximum period to create a cash reserve to cover any shortfall in taxes due on 31 January 2015.
• If your profits have been reducing, you can make an election to reduce the second payment on account for 2013-14, due on 31 July 2014.