Archive for the ‘Bookkeeping’ Category

Benefits and expenses – bespoke scale rates

Wednesday, March 9th, 2016

From 6 April 2016 there are a lot of changes to the way in which benefits and expenses are reported to HMRC.

HMRC have set out the maximum tax and NICs free allowances that can be paid by employers to employees for subsistence. Subject to qualifying conditions, the amounts are set out below:

 

Minimum journey timeMaximum amount of meal allowance
5 hours£5
10 hours£10
15 hours£25

 

Where a meal allowance of £5 or £10 is paid and the qualifying journey in respect of which it is paid lasts beyond 8pm a supplementary rate of £10 can be paid.

Employers may choose to reimburse employees for the actual costs incurred. However where employers wish to use bespoke rates other than those set out above, they will need to apply for approval from HMRC for bespoke rates.

HMRC have issued an online application form to allow employers to request approval for these bespoke amounts. This should state the rate that the employer wishes to pay and also needs to demonstrate that the amount is a reasonable estimate of the amount of expenses actually incurred by the employees.

To establish these amounts, HMRC have confirmed that the employer should carry out a sampling exercise to verify the actual expenses incurred by employees. We would be happy to advise you on the sampling which would need to be carried out for your business.

In addition, employers will need to have a checking system in place which ensures that the payments or reimbursements are only make on occasions where the employee would be entitled to a deduction from their earnings and that the employees have actually incurred and paid the amounts.

Once approval has been given by HMRC, they will issue an approval notice which sets out the date from which the approval is given and what expenses are covered. It will also state the date when the approval notice ends which will be no later than five years from the start date.

Please do get in touch if you would like help with benefits and expense reporting or agreeing Bespoke rates.

Internet links:

GOV.UK

HMRC

Annual Tax on Enveloped Dwellings (ATED) updated procedures

Wednesday, September 9th, 2015

Since 2013 a range of measures have been introduced to discourage the holding of residential property in the UK via companies, partnerships and collective investment schemes. In summary, these measures are:

  • Stamp Duty Land Tax (SDLT) is payable at 15% on the acquisition on or after 20 March 2014 of properties costing more than £500,000
  • an Annual Tax on Dwellings (ATED) applies at a fixed amount depending on value and
  • Capital gains tax (CGT) at 28% is payable on a proportion of gains for the period that the property has been subject to ATED.

There are specific reliefs and exemptions for certain types of properties.

Changes in limits

Prior to 1 April 2015 the lower property value threshold for ATED was a value of more than £2m on 1 April 2012, or at acquisition, if later. With effect from 1 April 2015, residential properties valued at more than £1m and up to £2m on 1 April 2012, or at acquisition if later, were brought into the charge.

From 1 April 2016 another new valuation band comes into effect for properties valued at more than £500,000 but less than £1 million.

The threshold for ATED-related CGT disposal consideration has also reduced from £2m to £1m from 6 April 2015 and will further reduce to £500,000 from 6 April 2016.

ATED Procedures

ATED is reported and the tax paid through an annual return. The return periods run from 1 April to 31 March each year.

Normally an ATED return must be made within 30 days of the date on which the property first comes within the charge to ATED for any chargeable period. Where the property is within the scope of ATED on 1 April each year, the return must be filed by 30 April in the year of charge. Payment of the tax is due with the return.

There is a special rule for properties coming within the scope of ATED from 1 April 2015 under the lower threshold of £1m detailed above. The rule is that returns for the chargeable period beginning 1 April 2015 must be filed by 1 October 2015 if the property was held on 1 April 2015 or within 30 days of acquisition if this is later. Payment of the tax is due 31 October 2015.

The chargeable person must submit an ATED return for any property that is within the scope of ATED for the relevant chargeable period. There are reliefs available which may reduce the liability in part or to zero. However, all claims for reliefs must be made in a new ‘relief declaration return’ and these new returns to claim relief have now been made available.

Returns for properties falling within the lower band of £500,000 are due for the chargeable period 1 April 2016 to 31 March 2017. The normal filing dates apply to properties within this new band. For example, if you hold a property valued at more than £500,000 on 1 April 2016, you must file your return and pay the tax by 30 April 2016.

Returns

In addition, a new ‘relief declaration return’ is introduced. Broadly, for each type of ATED relief being claimed, the company can submit a relief declaration return stating that a relief is being claimed in respect of one or more properties held at that time. No details are required of the individual properties or the number of properties eligible. Where a property is acquired in-year which also qualifies for the same type of relief, the existing return is treated as also having been made in respect of that property.

A normal ATED return will still be required in respect of any property which does not qualify or ceases to qualify for a relief i.e. where tax is due.

ATED and the reliefs available are a complex area. Please contact us if you would like specific advice.

More information is available from the Government Website

New business start ups

Wednesday, May 6th, 2015

 This posting lists a few (but not necessarily all) of the tax issues you will need to consider when you are planning a new business:

  1. Get you business registered with HMRC, failure to do this can lead to penalties. If you are incorporating your business, HMRC generally pick up your business registration via their links with Companies House. But if you are aiming to be self employed, as a sole trader or in partnership, you will need to notify HMRC within certain time limits of your commencement date.
  2. In similar vein, if you need to employ staff you must register as an employer with HMRC.
  3. If you intend to register for VAT from the date you commence to trade you can still recover input VAT that you have paid on certain setup costs that you expended prior to the official start date.
  4. If you intend to register your business for VAT could you take advantage of one of HMRC’s special VAT schemes? For example:
  1. Cash accounting: pay over the VAT you have collected on your sales when you are paid by your customer, rather than when you issue your sales invoices. There are turnover limits to registration, but this option can have a significant impact on cash flow if the amounts you are owed is more than the amounts you owe.
  2. Flat rate scheme: using this scheme you calculate the amount you owe as a fixed percentage of your turnover each quarter (including VAT). For smaller businesses, who do not have significant VAT inclusive costs, this scheme can produce additional profits and simplify the calculation of your quarterly returns.
  3. Annual accounting: using this scheme you send in one VAT return a year instead of the usual four. Also for nine months of the year you make agreed payments on account to cover VAT due. The scheme is simple to administer, only one set of calculations per annum, and the monthly payments help to spread the cash flow impact of payments made.
  1. Invest in tax planning. The UK’s tax code is one of the most complex in Europe. We recommend that you take tax planning advice before you start in business and again at certain key moments in your trading year. At the very least you should discuss your trading results with your advisor before the end of your first trading year. It always pays to see what planning options are available before you take action to implement change.

If you are about to set-up a new business please call, we offer a no obligation first appointment to prospective new clients.    

April – Monthly Round Up

Tuesday, April 7th, 2015

Budget 2015

George Osborne presented the final Budget of this Parliament on Wednesday 18 March 2015.

In his speech the Chancellor reported ‘on a Britain that is growing, creating jobs and paying its way’.

Towards the end of 2014 the government issued many proposed clauses of Finance Bill 2015 together with updates on consultations. Due to the dissolution of Parliament on 30 March some measures have been legislated for in the week commencing 23 March, whilst others will be enacted by a Finance Bill in the next Parliament (depending on the result of the General Election).

The Budget proposed further measures, some of which may only come to fruition if the Conservative Party is in power in the next Parliament.

The articles which follow summarise some of the key changes.

Internet link: GOV.UK Budget

Personal tax rates and allowances

For those born after 5 April 1938 the personal allowance will be increased to £10,600. For those born before 6 April 1938 the personal allowance remains at £10,660.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200.

Tax bands and rates for 2015/16

The basic rate of tax is currently 20%. The band of income taxable at this rate is being decreased from £31,865 to £31,785 so that the threshold at which the 40% band applies will rise from £41,865 to £42,385 for those who are entitled to the full basic personal allowance.

The additional rate of tax of 45% is payable on taxable income above £150,000.

Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%.

Starting rate of tax for savings income

From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased from £2,880 to £5,000, and this starting rate will be reduced from 10% to 0%. These rates are not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

This will increase the number of savers who are not required to pay tax on savings income, such as bank or building society interest. Eligible savers can register to receive their interest gross using a form R85.

Internet link: GOV.UK Budget

Proposed personal allowances to come

The Chancellor announced that the personal allowance will be increased to £10,800 in 2016/17 and to £11,000 in 2017/18. The Transferable Tax Allowance will also rise in line with the personal allowance, being 10% of the personal allowance for the year.

The higher rate threshold will rise in line with the personal allowance, taking it to £42,700 in 2016/17 and £43,300 in 2017/18 for those entitled to the full personal allowance.

Personal Savings Allowance

The Chancellor announced that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April 2016.

The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year. The Personal Savings Allowance will not be available for additional rate taxpayers.

These changes will have effect from 6 April 2016 and the Personal Savings Allowance will be in addition to the tax advantages currently available to savers from Individual Savings Accounts.

The Personal Savings Allowance will provide basic and higher rate taxpayers with a tax saving of up to £200 each year.

Internet link: GOV.UK News

Help to Buy ISA

The government has announced the introduction of a new type of ISA, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home.

The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.

Help to Buy ISAs will be subject to eligibility rules and limits:

  • An individual will only be eligible for one account throughout the lifetime of the scheme and it is only available to first time buyers.
  • Interest received on the account will be tax free.
  • Savings will be limited to a monthly maximum of £200 with an opportunity to deposit an additional £1,000 when the account is first opened.
  • The government will provide a 25% bonus on the total amount saved including interest, capped at a maximum of £3,000 which is tax free.
  • The bonus will be paid when the first home is purchased.
  • The bonus can only be put towards a first home located in the UK with a purchase value of £450,000 or less in London and £250,000 or less in the rest of the UK.
  • The government bonus can be claimed at any time, subject to a minimum bonus amount of £400.
  • The accounts are limited to one per person rather than one per home so those buying together can both receive a bonus.
  • As is currently the case it will only be possible for an individual to subscribe to one cash ISA per year. It will not be possible for an account holder to subscribe to a Help to Buy ISA with one provider and another cash ISA with a different provider.
  • Once an account is opened there is no limit on how long an individual can save into it and no time limit on when they can use their bonus.

The government intends the Help to Buy ISA scheme to be available from autumn 2015 and investors will be able to open a Help to Buy ISA for a period of four years.

Internet link: GOV.UK factsheet

Pension freedoms for those with annuities

The Chancellor has announced a new flexibility for people who have already purchased an annuity. From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity for a capital sum.

Individuals will then have the freedom to take that capital as a lump sum, or place it into drawdown to use the proceeds more gradually.

Income tax at the individual’s marginal rate will be payable in the year of access to the proceeds.

The proposal will not give the annuity holder the right to sell their annuity back to their original provider. The government has begun a consultation on the measures that are needed to establish a market to buy and sell annuities and who should be permitted to purchase the annuity income.

The government recognises that for most people retaining their annuity will be the right choice. However, individuals may want to sell an annuity, for instance to pay off debts or to purchase a more flexible pension income product.

We will keep you informed of developments.

Internet link: GOV.UK News

National Minimum Wage rises

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2015:

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
  • the apprentice rate will increase by 57 pence to £3.30 per hour

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC ‘name and shame’ non-compliant employers.

If you have any queries on the NMW please get in touch.

Internet links: GOV.UK News

Stolen mobile charges to be capped

Thursday, March 26th, 2015

Major mobile networks have confirmed plans to introduce protection for consumers from huge bills run-up on stolen mobiles following Government action.

Under the voluntary agreement, five mobile networks – EE, O2, Three, Virgin Media and Vodafone – will protect around 27 million consumers on pay monthly contracts from being hit with shock bills through no fault of their own. They will all offer consumers a liability cap set at £100 when reported within 24 hours of being lost or stolen to the mobile network and police.

Ed Vaizey, Minister for the Digital Economy, said:

Protecting hardworking families from shock bills through no fault of their own has been a priority for this government. By working with the mobile operators, we have secured an agreement that will provide consumers with real benefits as well as offer peace of mind.

According to the National Mobile Phone Crime Unit (NMPCU) around 300,000 mobiles are reported stolen to the police each year in the UK.

Three has been the first mobile network to introduce this protection for its customers in January 2015. The other operators have now confirmed their plans:

  • EE will introduce in the coming weeks;
  • O2 will introduce the cap by September 2015;
  • Virgin will introduce the cap from 1 July 2015; and
  • Vodafone will introduce the cap this summer.

The protection comes as part of a new Code of Practice that all five mobile operators have signed up to. The code will also help protect consumers themselves from unexpectedly high bills and excessive costs from:

  • Out of bundles charges – by providing clear and transparent pricing information, alerts when they reach data bundle limits or the ability to monitor usage.
  • Roaming – providing information on how to turn off data roaming and avoid roaming charges.
  • Premium Rate Services and in-app purchases – provide barring function so consumers can protect against unauthorised or inadvertently calls to premium rate voice services, and protections against in-app purchases.

Payment in 30 days

Tuesday, March 3rd, 2015

In a recent speech Business Minister, Matthew Hancock, announced that the government-backed Prompt Payment Code will now promote 30-day terms as standard, with a 60-day maximum limit. Unless signatories can prove exceptional circumstances for longer terms, they will be removed from the Code.

The change will be rigorously enforced by the new Code Compliance Board, which will include people from business representative bodies who will investigate challenges made against signatories to the Code by their suppliers. The Compliance Board will remove signatories found to be in breach of the Code’s principles and standards.

The Prompt Payment Code sets out fair and agreed practices for businesses to follow when dealing with, and paying, their suppliers. More than 1,700 businesses and public authorities have so far committed to these principles, which include paying suppliers within an agreed timeframe and communicating with them effectively.

Business Minister Matthew Hancock said:

“Making small businesses wait an unreasonable time for payment is entirely unacceptable. I know first-hand the great burden that late payment can place on firms – and how it can strain family finances – which is why I am committed to stopping it.

Big companies should lead by example and pay small suppliers within 30 days. I have already written to the FTSE 350 urging them to sign up to the Prompt Payment Code.

Fairer payment practices will help small businesses grow and create jobs. This is a key part of our long-term economic plan to build a better Britain.”

Businesses will be actively encouraged to start complying with the strengthened Prompt Payment Code in the coming weeks. The changes complement the tougher reporting laws in the Small Business, Enterprise and Employment Bill. These new laws will force the UK’s largest companies to publish their payment terms, increasing transparency and empowering small businesses. The Code Compliance Board will be able to use this data to review the status of signatories to the Code and challenge those that either do not pay their suppliers promptly or insist on excessively long standard terms.

The Prompt Payment Code is a voluntary Code to drive a change in payment culture. It is administered by the CICM on behalf of BIS. More information about the Code can be found at Prompt Payment Code website.