Employee Home workers - This area of economic activity continues to evolve due to computers, fax machines, and answering machines etc being common place in the home nowadays.
Either;
The employer may reimburse a proportion of home expenses and make a payroll adjustment; or
The employee may wish to claim all estimated expenses wholly, exclusively and 'necessarily' incurred by way of home working.
Note the use of the word necessarily. In other words the contract of employment must show that this home working is completely necessary requirement as part of the employer's business operations. Most claims are also restricted to heating and lighting costs. Inland Revenue interpret the legislation applying here very strictly.

As always contact us first before making a home worker claim.

Update:
 
HM Revenue & Customs updated their own guidance to Inspectors about using your own home for business purposes. (January 2007).  
 
Fixed costs and running costs are now allowable either on the time given over to running the business, (usage), from home or as a proportion of floor space i.e. rooms used. The basis used is important as is the number of homes you own etc etc........
 
There may be capital gains tax implications on the sale of the house if claims are not subjected to some planning before hand - the due dillegence.
 
There is some debate at the moment whether or not retrospective claims for use of home as business should be re-submitted. Certainly this will have a bearing on any future tax enquiries where the return was submitted before the new guidance became common knowledge.

AUDIT EXEMPTION SERVICES (FOR QUALIFYING) LIMITED COMPANIES
Section 249A of the Companies Act 1985 provides that companies (with some exceptions at s249B) with a turnover below a certain level are not required to have a statutory audit of their accounts. The audit exemption threshold was increased in May 2000 (applying to financial periods ending on or after 28 July 2000) when it was raised from £350,000 to £1 million. This has been recently raised to £5.6m subject to statutory formalities in the House. Audit exemption is now therefore available to most incorporated businesses with turnover under £1m and/or on a transitional basis to those with £5.6m turnover and under. Subject to both qualifying as a small company by statute and providing the services normally exempt from a statutory audit.

Post 31st March 2004 , the turnover threshold is raised to £5.6m, if your financial accounting period ends after this date. This is in line with the EU's definition of a small company. This change takes place from January 2004 and is again expected to apply to all accounting periods ending on or after 31 March 2004 by statutory instrument, in line with UK acceptance of existing EU Law. The following EU company maxima was adopted by the UK on 13 May 2003 by acceptance of a binding EU Council Directive. These definitions of company size were made UK Company Law as of 15 May 2003 and led in no small part to the recent raising of the audit threshold:
Small Company Turnover £5.6* Balance Sheet Total £2.8m* Number of Employees 50*
Medium Company Turnover £22.8m* Balance Sheet Total £11.4m* Number of Employees 250 *

*Not more than
Effectively, most small companies may now qualify to have their financial accounts exempt from statutory audit as of January 2004 on a transitional basis.It will most certainly be the case for all qualifying companies with accounting periods ending in corporation tax year 2004/05. As usual please seek our professional advice, via the contacts given on this sites home page, before undertaking your company's audit exemption reports. Just referring to the general overview given here will not be enough. An audit performed by a Registered Auditor can also be legally more expedient if not just a statutory requirement.

TAX CREDITS
Around 1991 Independent taxation of spouses was introduced. By 6 April 2003 this was theoretically history but technically still the law of the land because of the governments tinkering with the concept of Tax Credits. Tax Credit Form 600 gives credit to people on low earnings and is not really dependent on tax paid or whether you are on state benefits or not in the case of Child Tax credit. It initially attempts to link all spouses/households to the children in their care in a parenting capacity. It attempts to make parents responsible for their offspring all their working lives and beyond by linking them up in the tax system. This should gradually help to cut taxpayers costs for state contributions made for errant parents undetected to date by the not too successful Child Support Agency. Most Child Tax Credits are paid directly into the female spouse's bank account. Another can be nominated but only in exceptional circumstances.

It you qualify for Child Tax Credit then you may get certain Child Care costs. A top up in your income in the form of Working Families Tax credit is also possible to guarantee a minimum standard of living. WFTC is given to all in work who qualify whether they are parenting, cohabiting or not. Most people now have at least 1 tax return per year due to the introduction of Tax Credits. You have 3 months to file one from April 5 each year before you start losing some of your entitlement.

If your accountant is not professionally appointed to complete your TC600 Form then it is your own responsibility to file it. Many accountants do not want to get involved because it is all covered by Social Security Legislation and outwith their sphere of competence. It also pushes up practice running costs and therefore chargeable hours to clients. It also has nothing to do with reducing your income tax at the tax collectors office. It is to be hoped that both the SA Tax Return and the TC600 Return Form are combined into one simple exercise for the self-employed and company directors etc, at some point in the future. At present it looks rather like you are being over taxed just to claim it back via the conceptually flawed misnomer known as the Tax Credits regime TC600 Form.

REPORTING MONEY LAUNDERING
Since 1 March 2004 the accounting profession and those holding themselves out to be accountants, is regulated by the Proceeds Of Crime Act 2003. Basically clients are now no longer theoretically protected by the professional ethic known as 'client confidentiality' in the accounting profession. There are procedures to follow when an accountant in practice has suspicion or knowledge about a client who may be involved in criminal activities due to the financial transactions they have enter into. It is not a simple 'de minimus' matter either. All transactions are reportable- where there is a suspicion be it 1p or £1,000,000,000! High value transactions of around £9,000 plus are automatically reportable in certain circumstances.

Basically the authorities are just following the money! An old tactic used to bring notorious American gangsters to justice around the Prohibition period. Since this is all still in its infancy it remains to be seen whether it will be the success, we all must hope for, if it can cut back on the criminal fraternity stealing this societies wealth. Policing clients is not as common as one may think and it will be business as usual for the majority.

KEEPING BUSINESS RECORDS
You must keep all business books and records for 6 years after the date they were normally due to be filed on time at Inland Revenue. 8 years for PAYE. Those who do not are leaving themselves wide open to spurious tax 'discovery' assessments), by an enquiring Tax Inspector, as well as avoidable personal grief. Business records can vary from the individuals 'shoe box' accounts to the requirements of a limited companies financial record keeping system under company law. It really is up to you to decide what's appropriate for your enterprise. Inland Revenue will expect records to be drawn up competently, whether you do your own return or not. Recognition of revenue and expenses must be both recorded carefully, matched on a wholly and exclusive basis, and then more usually incurred 'necessarily' in the course of a trade/enterprise.

'Cash businesses' are common amongst 'cash & carry' small traders and it is not illegal to conduct such a business so. However, where internal controls are weak, such as banking, and sales recording, an Inspector will immediately seek to prove that there is hidden or suppressed income because of the invisible nature of dealing in cash. Cash businesses run the risk of a full enquiry or even an Inland Revenue 'fishing expedition' into all their business and personal affairs. Not for nothing do Inland Revenue treat cash business record keeping systems with a great deal of cynicism. However many innocent traders get tarred with the same brush as those in the black economy. Do get a business bank account for all your business activity and resist using a personal or joint account. Keep your business spending separate from your personal or joint household/living bank accounts. For a full book-keeping service suitable to your business operations we can advise.