My sofware (Ftax) doesn't calculate the foreign tax credit so I have to do a manual calculation [Note to self : change software provider for 2019/20 !]
The simplest way to do the manual calculation is to run the software tax calculation (a) including the foreign dividend income and (b) excluding the foreign dividend income, and the difference between the two calculations is then the value of the UK tax payable on the foreign income (foreign tax credit claim is then the lower of this UK tax difference and the amount of foreign tax suffered) , but this approach to the calculation presumes that the dividend allowance is allocated to the UK dividends first.
I had two instances of this, both relating to female clients who had been registered as self-employed and paying class 2 nic for years, but in the change over to class 2 being collected via the self-assessment system their NI No's were not mapped across onto their self assessment records due to some snag in the system caused by my client's self-assessment records being held in their maiden names whilst their DWP records were held under their married names.
The whole thing was a nightmare to resolve because HMRC's computer system somehow managed to create a second self-assessment record and UTR number for these clients. Because there are no direct lines of communication between DWP and HMRC's self-assessment department it took months to resolve these issues even after the cause of the problem was identified.
It was such a mess that HMRC didn't have a leg to stand on and had to cough up when I billed them for the hours I lost acting as the go-between relaying messages between the two departments to get the problem fixed.
I already know that the R&D tax credit adjustment is to be reported within the current year's accounts with no restatement of the prior year comparatives ( I appreciate that I didn't make this clear in my original question).
What I'm not sure about is whether I need to include a note in the accounts to explain the 'adjustment to prior year tax charge' included within the current year's tax charge as this will be a material figure within the context of the current year's accounts.
It is my understanding that directors' bonuses can be accrued into the annual accounts and claimed as a tax deduction in the year of accrual as long as
the bonus is paid within 9 months of the year end date.
Is it then a condition of this tax allowance that such accrued bonuses must be paid by way of a 'payroll reportable' payment and cannot be paid by means of an additional employer's contribution to the directors' pension ?
Am I being naive in thinking that where a business has genuinely invested in R&D there should be some evidence of this on the bottom line for the year in question ??
ER nic on BIK @ 13.8% plus personal tax @ 21% (Scotland) will cost the family more than the Corp Tax saving @ 19% - hence better to charge to directors loan a/c and declare as a dividend and pay 7.5 % dividend tax than to expense as BIK at net cost of 15.8%.
Cost in excess of £50 each so unable to go down trivial benefit route.
For clarity, the company in question is a client of mine and the meal was paid for by the company.
I have advised my client that no VAT can be claimed on the cost of the meal and I have advised them to charge the whole cost to the directors' loan account as a personal expense, which is obviously not what they wanted to hear.
In posting the question I am simply looking for a second opinion to confirm that I have advised my client correctly.
My answers
My sofware (Ftax) doesn't calculate the foreign tax credit so I have to do a manual calculation [Note to self : change software provider for 2019/20 !]
The simplest way to do the manual calculation is to run the software tax calculation (a) including the foreign dividend income and (b) excluding the foreign dividend income, and the difference between the two calculations is then the value of the UK tax payable on the foreign income (foreign tax credit claim is then the lower of this UK tax difference and the amount of foreign tax suffered) , but this approach to the calculation presumes that the dividend allowance is allocated to the UK dividends first.
Yes, I understand that the foreign tax can only be claimed up to the value of the UK tax liability.
In advising that UK dividends can be allocated against the dividend allowance first, how do reach this opinion ?
I had two instances of this, both relating to female clients who had been registered as self-employed and paying class 2 nic for years, but in the change over to class 2 being collected via the self-assessment system their NI No's were not mapped across onto their self assessment records due to some snag in the system caused by my client's self-assessment records being held in their maiden names whilst their DWP records were held under their married names.
The whole thing was a nightmare to resolve because HMRC's computer system somehow managed to create a second self-assessment record and UTR number for these clients. Because there are no direct lines of communication between DWP and HMRC's self-assessment department it took months to resolve these issues even after the cause of the problem was identified.
It was such a mess that HMRC didn't have a leg to stand on and had to cough up when I billed them for the hours I lost acting as the go-between relaying messages between the two departments to get the problem fixed.
Is this question for real ?
I'm struggling to decide whether the OP is arrogant or just plain stupid !
Hat's off to Penelope Pitstop for having the patience to pen a sensible reply to such a rediculous question.
Thank you for your response.
I already know that the R&D tax credit adjustment is to be reported within the current year's accounts with no restatement of the prior year comparatives ( I appreciate that I didn't make this clear in my original question).
What I'm not sure about is whether I need to include a note in the accounts to explain the 'adjustment to prior year tax charge' included within the current year's tax charge as this will be a material figure within the context of the current year's accounts.
Thank you.
I now see this is clearly spelled out in HMRC's Pensions Tax Manual at PTM043100
It is my understanding that directors' bonuses can be accrued into the annual accounts and claimed as a tax deduction in the year of accrual as long as
the bonus is paid within 9 months of the year end date.
Is it then a condition of this tax allowance that such accrued bonuses must be paid by way of a 'payroll reportable' payment and cannot be paid by means of an additional employer's contribution to the directors' pension ?
Am I being naive in thinking that where a business has genuinely invested in R&D there should be some evidence of this on the bottom line for the year in question ??
ER nic on BIK @ 13.8% plus personal tax @ 21% (Scotland) will cost the family more than the Corp Tax saving @ 19% - hence better to charge to directors loan a/c and declare as a dividend and pay 7.5 % dividend tax than to expense as BIK at net cost of 15.8%.
Cost in excess of £50 each so unable to go down trivial benefit route.
For clarity, the company in question is a client of mine and the meal was paid for by the company.
I have advised my client that no VAT can be claimed on the cost of the meal and I have advised them to charge the whole cost to the directors' loan account as a personal expense, which is obviously not what they wanted to hear.
In posting the question I am simply looking for a second opinion to confirm that I have advised my client correctly.