HMRC – Page 3

Where is BX9 1BX? What happens to HMRC post?

Have you had a letter from HMRC with the new BX9 1BX address? Did you write back to it? What happened to your letter?

BX9 1BX is an artificial post code and it’s not on the Royal Mail database. It’s a mail handling facility operated by HMRC in Bexley, Kent. Letters are opened and scanned and electronically dispatched to other HMRC offices. Occasionally, bulky items are forwarded as originals (using internal mail) to the HMRC office which is to deal with them.

In Jun 2006 we adopted a policy of sending all communications to HMRC by Special Delivery, because they fail to handle phone calls well, and they tend to lose ordinary mail. They also routinely fail to sign for Recorded Delivery letters so it has to be Special Delivery. When all of the offices consolidated a few years back, we resorted to using this main address for nearly all the mail we send to HMRC:

HM Revenue and Customs
Benton Park View
Newcastle Upon Tyne
NE98 1ZZ

That’s another mail handling facility just like the one in Bexley. Interestingly, the HMRC web site tells couriers to always use the Newcastle address.

You can check that web page here. Incidentally, the NE98 1ZZ postcode is on the Royal Mail database.

So this letter really amused us:

Perhaps somebody should let Mrs L Whittle know?

The New Marriage Allowance

The new Marriage Allowance is set to come into force on 6 Apr 2015 when the new tax year starts. It was announced in last year’s Budget when David Cameron and George Osborne made a big deal about it . . .

Prime Minister David Cameron: “I made a clear commitment to the British people that I would recognise marriage in the tax system.”
Chancellor of the Exchequer George Osborne: “Our new Marriage Allowance means saving £212 on your tax bill couldn’t be simpler or more straightforward.”

However, it is not as simple as that. My wife and I have been married a long time and we will not save a single penny, because the new Marriage Allowance does not apply to two spouses who are both taxpayers. You have to have one spouse with income of less than £10,600 in order to benefit That’s the tax threshold for 2015/16 and so this new allowance only works when there is one spouse who is not a taxpayer.

In this context, marriage includes all of the recent forms of civil partnership and such like.

The rule applies to income as a whole, not just “earnings” so you have to take into account wages and interest received and rent received and all manner of income. And there is another, less trumpeted, rule which says “if the higher income spouse is a higher rate taxpayer, the allowance is not available” so some of you can stop reading now!

If you are in a situation with one spouse with income of less than £9,540 and the other with income of more than £11,660 (but less than £42,385) then you will get the maximum benefit, and you need to claim the allowance. I don’t think there are any clients on my books with that precise set of circumstances, but please do correct me if I’m wrong.

In the right circumstances the lower income spouse can elect to transfer up to 10% of the annual personal allowance to the higher income spouse. That’s a maximum of £1,060 for 2015/16. Then, if the other spouse has sufficient taxable income with repayable tax credits (note that dividend income whilst taxable, does not have repayable tax credits) then the higher income spouse stands to gain £212 (that’s 1,060 x 20%).

Claims can be made online https://www.gov.uk/marriage-allowance

The social impact of this is what the Government wants to shout about. It will put £4.08 per week into the pocket of a few poorer couples in the UK. The cost of the tax saving measure is small and the percentage of UK taxpayers who will benefit is small. However, with an election coming up, you can be sure that the Government will be repeating this, a lot!

Call me a cynic, but David Cameron’s and George Osborne’s words (above) do not “recognise marriage” across the board and they do not make UK taxation “simpler or more straightforward”. It just means that accountants have to ask more personal questions in order to complete your Self Assessment tax returns. More work for accountants and (wishful thinking) higher fees for us? Maybe I should be grateful?

Dividend Vouchers

The retained profits generated by UK companies of all sizes can be distributed to shareholders. For professional workers (such as contractors, consultants, and freelancers), dividends make up the bulk of income drawn down from small limited companies.

If a limited company has made a profit, it is free to distribute these funds to its shareholders. This is the money the company has remaining after paying all business expenses and liabilities, plus any outstanding taxes (such as Corporation Tax and VAT). Even if the year end has not yet been reached, quarterly dividends can be paid on account of the profit which the company anticipates it will make.

‘Retained profit’ may have been accumulated over a period of time, and any excess profits not distributed as dividends simply remain in the company’s bank account. If you choose to distribute all of the available profit then it is likely that you have 80% of the company profits in your hands, whilst the company keeps 20% as a tax reserve.That’s how it looks from the company’s point of view.

As there is very little logic in tax law, your net dividend (prior to 6 Apr 2016) is deemed to have a 10% notional tax credit attaching to it. From an individual point of view, your net dividend is therefore 90% of some notional gross figure. These are the figures shown on the dividend voucher and these are the figures that go into a personal tax return (up to 5 Apr 2016).

Working via a limited company is a tax efficient way to operate, as National Insurance Contributions (NICs) are not payable on company dividends, whereas they are payable on salaried income.

Dividends must be distributed according to the percentage of company shares owned by each shareholder, i.e. if you own half the company’s shares, you will receive 50% of each dividend distribution.

In order to check how we calculate the dividend figure, our clients are provided with a 488120 ledgers report each quarter. Under the heading Creditor – YourName you can see how we have matched any periodic drawings to the quarterly dividends. This section of the 488120 report may also show idiosyncratic figures, adjusting your dividend for any personal expenditure made on behalf of an individual from a company bank account.

Invoicing clients with VAT

All invoices must show the same information as your letter headed paper, business address, registered number and that sort of thing (to comply with The Companies Act 2006). The following rules also apply:

The word “Invoice” must appear and be abundantly clear.
Invoices must be sequentially numbered and the numbering must be purely numeric.
The date of the invoice must be shown, along with the word “taxpoint”.
The name and address of the person being invoiced must appear. This is the name of your customer and not the name of the individual in their head office. If your customer is a business called XYZ Trading Ltd then the invoice should be addressed to XYZ Trading Ltd. You can for example also mark the invoice “F.A.O. Mr Jones” if you wish, but if you address it directly to Mr Jones then (in law) it looks like your are charging the fee to Mr Jones and making him personally liable for the debt.
If your UK business is VAT registered, the invoice must show a proper analysis of how the VAT has been calculated. A sub-total row, followed by a VAT calculation row which includes both the applicable VAT rate and the VAT payable, and finally a total row.
VAT invoices must show your VAT registration number.
VAT invoices to all UK customers must charge VAT at the current standard rate. There are a very few limited exceptions to this rule – talk to us if you sell “advertising space” to registered charities.
If you sell downloadable eServices from your website please read about VATMOSS first and then come back and read this! Normally, VAT invoices to EU customers (for services) must charge VAT at the current standard rate (as of 4 Jan 2011 that’s 20%) unless that customer is VAT registered in their State of origin.
This item relates only to invoices for work done before 1 Jan 2021 – it is here (in italics) just in case you are working on older records. VAT invoices (for intellectual services) to VAT registered businesses in the other 27 EU States must show the customer’s VAT number (usually below their address) and charge VAT at a special rate of 0%. The phrase “intellectual services” means the services of people like accountants, lawyers, teachers etc where what you are paying for is primarily knowledge and/or skill. It may or may not include advertising and sponsorship, and conferences and catering, when any of these services are performed in the UK. Talk to us if this applies to you.
This item relates only to invoices for work done before 1 Jan 2021 – it is here (in italics) just in case you are working on older records. If you cannot verify the VAT number of your EU customer on the Europa website then you must assume that they are not VAT registered and that means charging them 20% VAT!
VAT invoices to customers outside the UK vary depending on what you supplied and where you supplied it. If you supply intellectual services to a non-UK customer then the services are “outside the scope” of VAT and the VAT calculation row on the invoice should simply state “outside the scope”. In all other cases you may want to check the “place of supply” rules with us, and the meaning of “intellectual services” before you invoice your non-UK customer.
VAT invoices must be in GB Pounds. If you wish, you can show a different currency in the narrative within the “description of product/service”. It has to be done like this to comply with Reg 14(1)(i) The Value Added Tax Regulations 1995 and that allows VAT officers to quickly identify the right figures when they carry out a records inspection. If your client objects tell them you have to do it in GBP and the law is set out here.
Your policy on preparing currency conversions must have a reasonable basis, and be consistent each time. Our policy is to use average monthly rates as per the HMRC published figures and that way there is never any dispute over the authenticity.

You cannot charge VAT to clients until your VAT registration is confirmed. If in doubt, please consult your accountant before charging anybody VAT.

If you are in the habit of billing your clients with local currency figures in your narrative, then you will get used to the fact that the remittance you receive is normally less than the amount you invoiced. You may want to bear this is mind when generating your invoices so that you can figure in a little extra for bank charges and exchange rate losses.

When you pass your records to the bookkeeper, we will check for bank charges and exchange rate losses (or gains). If the bank charges are clearly shown, then we will record them as such. If that still leaves a small exchange rate loss (or gain) the we will record that separately as an allowable expense (or other income) and so your business will be taxed correctly on the amount that it has actually received. There is no need to for you to prepare any other documentation to show the loss (or gain) and we will calculate it using the monthly exchange rates published by HMRC.

Your invoice to your foreign client should fit one of these three examples.

Example 1 of 4

This example relates only to invoices for work done before 1 Jan 2021 – it is here just in case you are working on older records Non UK client in the EU with an EU VAT number

Example 2 of 4

This example relates only to invoices for work done before 1 Jan 2021 – it is here just in case you are working on older records Non UK client in the EU without an EU VAT number

Example 3 of 4

Non UK client

Example 4 of 4

Standard UK invoice to a UK client

Director shareholder payments 2014/15

There is an established working practice whereby directors of small limited companies (typically “one man” limited companies) reward themselves with a combination of small salary and big dividend. The point of doing this is to stay within the law, and to hand over the smallest possible sum of money to HM Revenue & Customs. In order to benefit from this working practice you must follow the system precisely. Failure to do so may lead to the imposition of a deduction of PAYE from your income and possibly a charge to interest and penalties if HMRC determine that any taxes are being paid late.

Most importantly, you must consider all of your personal income in order to determine the optimum level of income from your own company. This report assumes that you have no other income and are seeking the most efficient arrangement for your director shareholder payments in 2014/15 whilst still staying within the law.

You must be a director of a UK limited company to do this. Your salary is paid to you for the responsibility involved in holding the office of director.

You must also be a shareholder in the company in order to receive dividends. It follows that all shareholders shall receive dividends in direct proportion to their shareholding. Where you are the sole shareholder and have 100% of the shares, that’s relatively straightforward. Beware of adverse consequences if you decide to take 100% of the dividend when you are not the 100% shareholder.

The company may only pay dividends if it has a profit. If you are paying yourself sums of money out of investor funding (and not out of profit) then you are borrowing from your own company. This is a bad thing! HMRC may impose financial penalties on you for doing this – twice. There is one penalty for the company and a separate one for each overdrawn director.

Hold a monthly or quarterly meeting of the shareholders and decide what dividend can be paid. Prepare minutes of that meeting.

You need to know what the profits are, what the corporation tax bill is likely to be, and what is left over to distribute to the shareholders. Dividends are paid out of post tax profits, so you must ensure that the company has an adequate tax reserve. To allow for some flexibility you may choose to describe these amounts as “drawings” until the “dividend” is calculated.

Dividends are personal income and are subject to income tax in your hands. Owing to peculiar rules about tax credits and the taxation of dividend income, you may pay no additional income tax if you are a basic rate taxpayer. If you are likely to reach the threshold for higher rate tax you may need to prepare an additional personal tax reserve as set out below.

The pattern for basic rate taxpayers is this:

By combining a monthly salary of 663and a dividend of 2,543 your personal income (totalling 3,206) will be on the threshold of the 40% higher rate band for income tax. If you have sufficient funds and are prepared to suffer higher rates of income tax, then you may choose to follow this pattern.

There are graduated changes for annual incomes between 100,000 and 150,00 and the 45% rate of income tax also kicks in. The personal allowance is also withdrawn after 100,000 and so if you fit this picture, this final table is for you.

If you are a 40% rate or 45% rate taxpayer, then you will need to set aside a proportion of your income in order to pay your income tax bill under Self Assessment. For example, in this final table, for every secondary amount of £8,860 which you take, put 25% of that into your personal tax reserve. Then for every tertiary amount of £1,000, put 40% of that into your personal tax reserve.

Claiming Pre-Trade Expenses

I’ve only just registered my business. Can I claim pre-trade expenses which I’ve paid for personally? And can I claim back old VAT?

The short answer is “it depends”.

The basic principal is that “if you paid for something in the knowledge that you were starting a business, and the prime motive for buying this something was to enhance that business, then it is a business expense” and you can normally claim for it. That applies to both goods and services, and in order to claim the full cost you must satisfy both parts of this test, that (a) there was a business prime motive and (b) the purchase was within the three years preceding day one of the business.

Alternatively, if (for example) you bought your desktop computer and printer four years ago, and you introduced them into the business on day one, then you can claim their “fair market value” on day one as an allowable expense. This applies to goods only. If you cannot claim them under the three year rule mentioned above, then claim them under the fair market value rule, and use eBay or GumTree to work out what a fair market value for your something is. You can also claim for (for example) a CamCorder which you bought for the family two years ago, but then introduced into the business – it may fail the “business prime motive” test at the date of purchase, but it could still qualify under the “fair market value” rule as long as it is now a business asset and is not a family asset!

In either case, you need to submit a claim form to your business and have the precise amount reimbursed from the business account to your personal account. This applies, even if you are the only director/employee/worker. Documentation and adequate evidence are required in support of all claims.

If you’re thinking of introducing your car into your new limited company, you probably shouldn’t. The costs of tax and national insurance, on the benefit in kind of having a company car, usually mean that it’s actually more cost effective to run the car personally and to claim a business mileage allowance from your company.

Before doing the claim form, any VAT registered businesses should consider these additional rules. You can claim for the VAT on goods (and in limited circumstances on services too) provided that they:

• were purchased within the three years preceding the date of your VAT registration
• are still in the possession of the business on the date of your VAT registration
• are actually used in the course of the business; and
• satisfy the business prime motive test

Note that three years preceding the date of your VAT registration is only the same as three years preceding the commencement of the business if you were VAT registered from day one. There’s a subtle difference for businesses which waited a few months (or a few years) before applying for their VAT registration!

There are further guides on this site which may help you:

• What is a business expense?
• A Pre-Trade Expenses Flowchart
• The mechanics of how to claim back expenses (current & pre-trade)

Child Benefit is now a Tax Return issue

New rules governing the entitlement to child benefit come into force on 7 Jan 2013.

From 7 Jan 2013 the clawback operated in the band 50-60K.

From 5 Apr 2024 the clawback operates in the band 60-80K.

Until 2013 child benefit had never been means tested and had always been paid to the mother of the child. If your household income exceeds £60,000 then the chances are that the child benefit will be clawed back from you, in stages, so that by the time your household income exceeds £80,000 the whole amount of your child benefit may be reduced to Nil.

The rules (as you might expect) are not quite as simple as that, and what is going to happen in some cases is that a man may have to repay child benefit which their spouse/partner has received, even if the child in question is not his child. That also means that as accountants we will have to ask you a few searching personal questions after 5 Apr 2013 in order to be able to work out which figures go into which box on your tax return. And your spouse/partner may need to give you the details so that you can give them to us!

What is a business expense?

Allowable Expenses

The law is deliberately vague when it comes to defining what is an allowable expense for business purposes. Subject to some defined exceptions, we start with the principle that for a business expense to be allowable it has to be incurred “wholly and exclusively” in the course of the furtherance of the business.

That’s quite a tough test to start with, and you must ask yourself three questions.

1. Is that thing you’re thinking of wholly and exclusively for business purposes?
2. Will it further the commercial interests of the business? How?
3. Or will it further the personal interests of you the director?

We once had a client try to claim that her wedding on the island of Ibiza was an allowable expense of her UK limited company. And included in her records was the hefty bill which had been made out in the name of the groom! Anyway, she’s no longer a client, but it illustrates the point. We have a policy of deliberately losing some of our clients as per item 9.1 here.

Back to allowability – is your iTunes bill wholly and exclusively for business purposes? Please keep corporate matters corporate and personal matters personal.

UK GAAP

The law is set out at s46(1) Corporation Tax Act 2009 and in short it says “do it in accordance with UK GAAP”.

And where is UK GAAP defined in law? It isn’t! So what does it mean?

To find out what it all means you’ll need to read a dozen or more lengthy volumes of rules, because the Generally Accepted Accounting Practice in the UK is a whole body of accounting standards published by the UK’s Financial Reporting Council. Deloittes have published a condensed version in one massive handy-to-read volume, and it will cost you only £600.

The easier way to do this is to trust your accountant, because our professional training, and the on the job training and the repeated exposure to the generally accepted accounting practices during our careers means that accountants have a good understanding of what is generally accepted. And, as a profession we are required to prepare a true and fair picture of where your business stands. So claiming food for the guard dog is fine, as long as the dog is wholly and exclusively for business purposes. Your charming Yorkshire Terrier doesn’t quite fit the bill!

Dual purpose

Basically anything that has duality of purpose (private and business) fails the wholly and exclusively test. By concession, HMRC will allow a number of variations to that rule, and they also flatly refuse anything which pushes the rule too far. HMRC will give you tax relief only for furthering the aims of your business and not for your normal obligation to house and feed yourself. That means that those boxes of Nespresso coffee capsules will be disallowed. It’s about having a level playing field where you benefit the way that other businesses benefit, but you do not get tax relief on things which ordinary taxpayers do not get tax relief on.

What is “a business” anyway?

In order to establish what is a business expense, it also helps to know “what is a business”? A business is “an activity which is earnestly pursued with the objective of making a profit” as set out in the case of Customs and Excise Commissioners v Lord Fisher 1981.

So it follows that a business expense is a cost which is incurred in order to increase the chances of that activity making that desired profit. If the reason for incurring an expense is not the furtherance of the business (more profit), then it is simply not a business expense.

General Exclusions

Entertainment! Directors and employees can claim back business entertainment expenses, but remember that your employer will not get tax relief on them! There is a specific exclusion for entertainment costs. No matter how much you spend on entertaining clients, prospects and yourself and your staff, it’s all going to be ignored for tax purposes. It can be legitimately reimbursed, but in tax law it’s not an allowable expense!

Employers take note . . . taken to extremes, this could mean that a business with £10,000 of sales and £10,000 of entertaining has NIL profit on paper. For tax purposes, the same business has £10,000 of sales and NIL allowable entertaining, and actually has a £10,000 taxable profit. At 20% that could lead to a £2,000 tax bill! And that’s for a business that has NIL in the bank, because they spent it all on entertaining!

Travel and subsistence is allowed when you have to travel away from your normal place of work and put in a long day in order to do that (or spend a night away, etc). Generally journeys of less than 40 miles and/or hours of less than 9 hours per day will not be sufficient to justify a “travel and subsistence” claim. Nor will buying your lunch in Pret every day! HMRC will give you tax relief only for furthering the aims of your business. Caillebotte v Quinn

Commuting in the sense of ordinary commuting between your home and your normal place of work is not allowable. This applies to users of all methods of transport, whether public transport, private car, bike etc Section 338 ITEPA 2003 . Travel to a temporary workplace is not ordinary commuting and so the cost is deductible, but there are special rules about what is and what is not “a temporary workplace”. Having said that, journeys which are substantially similar to “ordinary commuting” are also disallowed.

Clothing is not allowable, unless it is protective clothing, or it’s a uniform which carries a conspicuous advert, or (for Theatre Companies) you’re buying costumes. Mallalieu v Drummond

Laundry If clothing is not an allowable expense then it follows that laundry is not an allowable expense. However, if you’re one of those special cases (see the previous paragraph) then you can claim for cleaning clothes and you will need receipts to support your claim. Naturally if you’re a self employed painter decorator and you wash your clothes at home then you won’t have any laundry receipts but you can claim the HMRC allowance – an annual amount of £60. Mulheran v HMRC

Gifts to customers (or suppliers) are not allowable unless they carry a conspicuous logo or message which promotes your services. If that is the case then they must still be worth less than £50 each. That’s why you see a lot of branded pens and USB sticks being handed out as freebies. There are other rules too, gifts have to have a degree of “permanency” so that rules out flowers, and food and drink!

Parking Fines. Remember “if the purpose of incurring an expense is not to help the furtherance of the business (more profit), then it is simply not a business expense” and that’s why parking tickets, etc are not allowable. If you have some crazy sort of business where your profits go up and up directly as a result of getting more and more parking tickets, we’d love to know about it!

HMRC Concessions to the “dual purpose” rule

Use of home as office – if your costs go up, because you run a business from home, you can claim the excess. That’s a big “if” and it’s there to help people with the extra costs of electricity and gas etc. It is not there to help with the costs of rent or a mortgage. And that’s because your rent or your mortgage do not increase, just because you have a business. The same goes for council tax – it’s not business related and the Government is not in the habit of allowing subsidies for costs which you would incur anyway – whether you have a business or not. If your business is genuinely run from home, you could work out the extra element of the cost of your utilities on the basis of time apportionment and/or square metres and claim that. Alternatively, you can claim a fixed amount per week under the HMRC concession. That was £4 per week for periods to 5 Apr 2020 and is now £6 per week for later periods. We know from experience that doing the long winded formula or just using the HMRC figure tends to give a similar result, so it’s easier just to go for the HMRC concession. The only cases we have where professions dictate having a cost consuming “office” at home are for a Dentist and for a General Practitioner. If you’re in a profession where you need to dedicate part of your home to special facilities, we can examine the use of a more robust formula, though that’s a very rare exception.

Motoring – in very few cases does it make sense to have a company car. The tax costs are simply too high. In most cases, business owners may do some business trips in their own private car. HMRC will allow you to claim for the business element of your motoring. The strict apportionment rule means logging all of your motoring costs in full and logging every single journey (both private and business) in order to calculate the business percentage of those costs. The easier way to do it is to log only the business journeys and to claim the HMRC approved FPCS rate. See this report for more details.

Benefits in Kind

Staff salaries are a business expense. Benefits in kind (like private health insurance, gym membership, company cars, etc) are also a business expense, but are subject to special rules. Because benefits in kind are part of a remuneration package they are treated like salary and that means that the monetary value must be established. The business is then subject to employer’s national insurance on that figure (at approx 13%). Additionally, the employee is subject to income tax (as if the benefit was extra salary) and to employee’s national insurance (at approx 12%) on that figure. In the case of many smaller businesses, benefits in kind are not a cost effective way to reward the director/shareholder, unless you like the idea of paying approximately 25% extra in national insurance.

Is it true?

These are the rules. There’s not a lot we can do to change them. We no longer argue with clients over what is authentic and what is not. However, may we please remind you that as a profession we are required to prepare a “true and fair” picture of where your business stands. And that takes into account both UK law and GAAP.

Is it fair?

The legal types amongst us will relish the thought of challenging HMRC in the tribunal system. The rest of us will simply follow the rules. If any of your staff take issue with that, ask them to take a look at the Senior Manager test.

New Starter Process

When you have a new starter please ask them to provide you with a copy of the form P45 from their last employer, and to help you compile a data set for us as the payroll bureau.

If your new starter does not have a P45, then they must down load and complete this New Starter Checklist.

The data set we require (on a Word Doc, a TXT file or a CSV file) is:

Family name
First name
Residential address including post code
National Insurance number
Date of birth
Mr/Mrs etc
Male/female
Date employment commenced
Job title
Employee’s email (for the individual electronic payslip)
The annualised salary
First pay date
Auto enrolment pension requirements

If any adjustments are required to the pay for the first payroll period, then please let us have precise details.

We would ask you to try and do this by the 22nd of the calendar month in which your new starter is going to be paid. Payrolls tend to be run around the 23rd or 24th of each calendar month.

Thank you.

Payroll Reports Completed

The payroll reports for this period have been completed. Payslips have been sent by e-mail (either directly to the staff or to the HR manager as specified by you) and the monthly report has been added to Dropbox.:

Please check the 677470 report which combines a full payroll summary and copies of all the payslips in one document. You will need to make a payment by the 19th of next month. Use your internet banking facility to make a payment to:

• Account name – HMRC Shipley
• Sort Code – 08 32 10
• Account number – 12001020
• Ref – your Accounts Office number as per our email

The Accounts Office reference number looks something like 123PP00123456 9999 where those last 4 digits represent the tax year and month, skewed to fit the tax year and not to fit the calendar year! That reference changes each month and you need to quote the exact AOB reference as per our email.

Idiosyncrancies

When a payroll is set up part way through a tax year, there can be a disproportionate amount of tax-free pay and NI-free pay, because some employees and directors may be entitled to the unused allowances covering all of the previous month’s in the tax year. If the net pay is uncharacteristically large and the employer’s NI cost is surprisingly low, it won’t last! By the end of the tax year, the monthly take home pay will reduce and the remittance to the Accounts Office will increase. This can be incremental and sometimes there can be one month (usually around October) when a significant hike in the figures occurs. That’s because the calculations have to be done on a cumulative basis throughout the tax year – and not in equal increments!