We get down to brass tacks on tax
SELF-ASSESSMENT is about role reversal, branch members who attended a special seminar on the Inland Revenue's new regime for the self-employed were told.
Ian Leigh of Jeffreys Henry chartered accountants gave a highly illuminating account of the new system, which has already begun to come into effect.
At the seminar on 2 December he stressed that self-employed people can tailor their tax affairs to benefit from the changes self-assessment will bring to the administration of tax.
The current system in which taxable profits are assessed two years in arrears is giving way to a current year basis of assessment.
During the transition period only a proportion of income and expenses within the accounting period fall to be taxed. This gave a useful tax planning opportunity, with real scope for savings, Leigh said.
Keeping proper tax records was vital, he said. The penalties for failing to do so could be severe. To satisfy the Revenue, current records must be kept for six years.
Instead of demanding a return within 30 days and tolerating return within six months, the present practice, under self-assessment taxpayers will have until 31 January to file a return. The Revenue would work out the tax for the taxpayer if the form was sent in four months earlier, by 30 September.
Leigh cheerfully fielded a host of questions about the new system and distributed a handy timetable with deadlines for 1997.
This was a most interesting and informative talk on an issue close to every freelance's heart.
Not exactly the death of the freebie!
The looming self-assessment scheme has concentrated a number of journalists' minds on tax -- and more than one has sold articles about how the Revenue is tightening up on freebies. They protest too much.
If some PR company flies you out to the Caribbean for a fortnight, you have to pay tax on the value of the trip, minus only the part which you can prove was wholly and exclusively necessary to your work. Similarly, that "loaned" hardware beloved of some in the trade press is taxable, as it has always been.
Freelance editor Mike Holderness comments: "The chance high-mindedly to turn down such freebies would be a fine thing." The death of the freebie is, however, a bit exaggerated. Accountant Tony Armstrong told the Freelance there are no formal policy changes: "It looks as though the Revenue has been briefing people and putting out scare stories to remind us all about old legislation."
BUT NOTETen minutes after the paper edition of the Freelance another accountant spoke with the Branch Chair and pointed out that companies are now liable for fines for not reporting payments in kind to their employees and contractors. So it is possible that you could receive a letter from the Revenue inviting you to explain that weekend in Paris...
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