Dippee.com - The Blah!

I recently found out that a number of people are coming on to our website, to find that what they were searching for, is not exactly what they are wanting when they arrive here.

Some examples of these are searches relating to SAGE T CODES, DIFFERENT VAT RATES and VT CASHBOOK

To help us improve the material on Dippee.com, we have added a forum to our site where you can ask pretty much anything, so long as it complys with our Terms of use and that it isn’t out of context.

Hopefully this does not come often, but we are all aware that it does. People do pass away all the time, but when it comes to dealing with their final tax afairs, how do you deal with something as simple as filling in a form 64-8?

So to start with this should be filled in by the executor of the deceased, in the first box on the left-hand side, as below.

I, John Smith as executor
of Mrs Jane Smith deceased

This form should be sent to the local office, along with a covering letter explaining that the client as passed away.
This should be all you need, as there is no real guidance provided by HMRC on how to fill-in this form for the deceased.

As many will already be aware that in September 2008, the personal allowance was changed to £6,035 from £5,435. Most people saw this when their tax code changed to 603L.

While I was preparing the accounts of a owner managed company, where the sole director has an annual saIary as the NI limit. This made me think, how could the director make effective use of the whole £6,035 without having to pay anymore tax? So, while looking through past papers for the ATT I saw a question relating to form CT61, looking at this I thought why not pay the director interest on the loan account?

By doing this the company could pay the director interest at an appropriate rate (Gross £600) this would mean that the director will be using the whole £6,035, without paying any NIC.

Although this is making effective use of the personal allowance, there is a few points, which need made.

• The directors loan account must be in credit for interest to be paid
• Tax will need to be deducted, at 20% and paid over to HMRC via form CT61.
• CT61, needs to be submitted by 14th day after the quarter end, in which interest is paid.
• CT61 quarters are March, June, September and December.
• Minutes of a directors meeting should be prepared, to show how and when interest is to be paid.
• An annual certificate of interest is to be given to the directors.

There is also other benefits to doing this, which include;

• The interest being paid is tax deductable, for Corporation Tax
• Tax which has been paid over to HMRC is wholey reclaimable, unlike dividend tax credits.

Thank You for taking the time to read this.

Disclaimer Notice
Please seek professional advice before acting, as I can’t nor will not be able to accept any responsability for losses or gains, which you may arrive at, from the information in this post. (Information correct as at 27/2/09)

As I am about to embark on my noble mission to complete the ATT qualification, i thought it would be nice to have a little online book shop.

I know there is little point in spending thousands on it all setting up, so I have decided to go to the biggest in the world amazon and now we have an agreement.

Which to put it simply means we now sell on books via Amazon, and for every one sold we get a percentage.

The store will be up soon.

Please seek professional advice before acting, as I can not accept any responsability for losses or gains, which you may arrive at from the information on this web site.

Everything on this website is primelary for Orry L. Clayton as reference, for both his studies, and practise of article writing for CPD, once qualified.

Should you wish to look over the information contained on the website, by all means please feel free to do so.

If you do not agree with, or have a difference of opinion on any of the posts, which have been made on this website, please post a comment on the website. Should you would rather email this can be done at orry[dot]clayton[at]dippee[dot]com

Update 17:00, 26th March 2009
I have now added a Disclaimer page to this site, which can be found at the top of every page on this site. Please read it, here.

Due to the changes within the standard rate vat. HMRC as updated it’s FRS rates so those who are on the scheme are not affected by it.

The table below shows a comparative of the old and new rate.

Please note that these rates will still be reduced by 1% if you are in your first year of VAT Registration.

If your next return crosses over the period of transition, you should use your old rate on sales before the 1 December 2008 and use the new one on the income after that date.

HMRC will be implementing a “light Touch” policy for the first VAT return submitted after this change. Basically if they find any errors, you will only have to pay the difference owed to them, if they are satisfied that the error has been accidentally caused by the change.

For more information on these changes please have a look at http://www.hmrc.gov.uk/pbr2008/measure1.htm.

Please note, the flat rate percentages can change at anytime, so you should be checking the rate per the HMRC website as often as possible.

Please seek professional advice before acting, as I can not accept any responsability for losses or gains, which you may arrive at from the information in this post. (Information correct as at 27/11/08)

Sage

This is probably the most commonly used programme on the market with a fairly easy to follow user interface. To Add the tempary 15% standard rate, I am recommending that you add it as your original TCODE T1.

I recommend you do this as most pre-entered products are set for T1.

To do this, open up your company file within sage close all the windows within sage such as suppliers, customers etc…
click on settings on the menu bar (ALT+I) choose configuration from the drop down menu a new window should open called “Configuration Editor” select the Tax Codes tab.

Go down to code T1 select it and press the edit button

Now fillin the following information:

Rate: 15.00
Tick Include in vat rtn
untick reverse charge
untick EC Code

Click OK

Now doing the same again but with TCODE T15 enter the following information 

Rate: 17.50
Tick Include in vat rtn
untick reverse charge
untick EC Code

I am recommending you do this incase you receive an invoice dated before the 1 December 2008

Now click OK, then apply.

then close, here you will be asked to save or not, this choice is upto you, as all this does is create an “.xml” file which contains a copy of all the information within the configuration. This is used only for when there has been quite a few adjustments to the configuration file and you would like to add new config to another system.

now when you create an invoice simply go into the product and change the code for it.

VT Cashbook & VT Transaction

Open the company file in either Cashbook or Transaction click on set-up on the top menu bar,
click on the vat rates tab, select 3 on the number of vat rates. Change the standard rate to 15%, Rate 1 as 5% and Rate 2 as 17.5%

I’m suggesting you do it this way as 15% will be the standard rate for awhile, so if you have it as standard it should default to there on sales invoices.

Then Click OK

There you are thats all the VT book-keeping programmes
It’s VT SIMPLE

Also, if you are on the margin scheme please remember to use the fraction 3/23

As many of you will be aware, on the 24th November 2008 the Chancellor of the Exchequer Alistair Darling has announced that there will be many changes to the current and future tax system.

The biggest bit of news from this is that the standard rate VAT currently 17.5% will be reduced by 2.5%, to 15%, which will take immediate affect from the 1 December 2008 to 31 December 2009. As a lot of book-keeping is now done on computerised systems such as Sage, VT Transaction and QuickBooks, as well as people on the margin scheme.

I am going to do a few little posts with regard to changing you system, which will be posted up in the next day or so.

If you use the VAT fraction i.e. 7/47, while we are in this period of 15% VAT the fraction to use will be 3/23.

I just thought, i’d share with you that i have now subscribed to tips and advise tax.

“This is a fortnightly newsletter, that comes once every two weeks”

These are 8 pages full to the brim, with useful tax information and some handy HMRC in-cites.
Available to order through there publisher Indicator Limited.

Well this is very much up for debate, as HMRC manual gives this example of how it should be shown;

A business has gross sales of £94,000 (including output VAT at 17.5% of £14,000), and expenses of £58,750 (including irrecoverable VAT). The flat rate VAT @ 6% is £5,640. A new machine is purchased (qualifying for capital allowances) at a cost of £2,350 including VAT of £350.

The accounts will show:

Turnover	£88,360	(£94,000 less £5,640 flat rate VAT)
Expenses	£58,750
Profit	£29,610

If VAT is not reclaimed on the asset the cost for capital allowances purposes will be £2,350. If VAT is reclaimed the cost will be £2,000.

But I myself think this would mean that you are underdeclaring your sales, and would mean that the gross profit margin would be affected, so should it be shown per my example below, based on the above example, as it is an admin expense and not a cost of sale.

A business has gross sales of £94,000 (including output VAT at 17.5% of £14,000), and expenses of £58,750 (including irrecoverable VAT). The flat rate VAT @ 6% is £5,640.

The accounts will show:

Turnover	£94,000
Expenses	£64,390	(£58,750 plus £5,640 flat rate VAT)
Profit	£29,610

As you can see there is no affect on the profit, but there is a major difference and as such I feel that the second example would be more correct, because turnover is expected to shown as only sales, and credit notes. You wouldn’t take a bad debt out of sales would you?

Although saying all that I will still do it the first way for the simple fact, that it that way per HMRC manual.

I say this because the FRS was created to make VAT easier for some people and companies, also to account for average of both Input and Output VAT. So a seperate FRS account in the expenses.

Reference: HMRC MANUAL bim31585