November Question and Answer Section
Newsletter issue - November 2010.
Q. I incorporated my business last year, but I haven't got round to opening a bank account in the company's name. All the business receipts and payments have been processed through my personal bank account. Will that have any tax implications?
A. You must open a bank account for the company as soon as possible as using your personal bank account could create a number of problems.
As the business was previously run in your own name the Taxman may not accept that the business has been transferred to your company, and want to tax you on any business income received into your personal bank account.
If the Taxman accepts the business was transferred to the company, you have further tax problems as your personal account holds funds that belong to the company. The Taxman will argue that those funds represent either a loan to you, or your salary. In either case a tax charge will arise unless you can repay the funds to the company, and this will be difficult without a company bank account! A third option is the funds you hold represent dividends. However, to pay a legal dividend the company must first show that it is making a profit.
Q. One of my employees frequently sustains injuries while playing sport, and as a consequence he takes regular periods off sick. Do I have to pay him statutory sick pay (SSP) for the time he takes off due to these self-inflicted injuries?
A. You are required to pay SSP to your employee if he earns at least £97 per week, for sick periods that last 4 days or more. Your employee needs to notify you of the sickness within the period set by your company rules, or by the 7th day of absence. You may require your employee to provide you with evidence of his incapacity to work from the 8th day of absence by, say, providing a certificate (now called a 'fit note') from his GP. Don't forget you can reclaim the amount of SSP that exceeds 13% of the class 1 NIC due for the month of payment.
Q. While collecting together the papers for my self-employed accounts to 30 November 2009, I noticed £1,500 of sales should have been recorded in the accounts to 30 November 2008, but were missed from that year. Should I add those old sales receipts to the 2009 sales and declare the total in my 2009/10 tax return?
A. The correct approach is to amend your 2008/09 tax return with the increased sales figure for the 2008 accounts, so the extra income falls in the 2008/09 tax year. This adjustment will increase the tax due for 2008/09 and you will have to pay some interest on the late paid tax. If you supply the Taxman with a full explanation of the error, without being asked to do so, you will probably get away with a zero penalty.
If, as you suggest, you add the missing 2008 income to your 2009 accounts and include the total in your 2009/10 tax return you will pay approximately the right amount of tax overall, but for the wrong tax years. This mis-timing of tax payments can attract penalties as you need to pay the correct amount of tax at the right time. Both your 2008 and 2009 accounts will be technically incorrect. You would need to declare the adjustment to your 2009 accounts on your 2009/10 tax return. If you don't make a full disclosure of the error on your 2009/10 tax return and the Taxman discovers the 'fix', he may conclude you have deliberately concealed the error and impose a penalty of up to 100% of the tax underpaid for 2008/09.