Amanda Lodge and Co

Making Tax Digital for VAT - the Final Deadline

183:776791144 (Amanda Lodge) — Fri, 04 Mar 2022 17:12:05 GMT

From 1 April 22 nearly everyone needs to comply - find out what you need to do.

I seem to have been rather busy recently and have not posted much. Over the next few months, I will let you know about changes to the tax system that are in the pipeline.

The first is the extension of making tax digital (MTD) for VAT to include almost all VAT registered buinesses.

All businesses that must be registered for VAT because their turnover is over £85,000 have had to be registered for MTD for VAT for some time now.

The upcoming changes relate to those who are voluntarily registered and have not yet set up for MTD. For periods starting on or after 1 April it now applies to everyone.

Experience from those who already use MTD for VAT shows that the changes have improved the accuracy of information sent to HMRC and this in turn means it reduces the risk of HMRC finding errors and starting investigations. It has proved to be one of those things that seemed like a huge upheaval at the time but now helps my clients run their businesses efficiently and provides the opportunity of much more accurate up to date financial information at your fingertips.

If it applies to me, when does it start?

The rules apply to the first VAT period of a business that starts on or after 1 April 2022.

What needs to be done?

Businesses will have to register for MTD for VAT with HMRC. They can do this themselves, or their agents can initiate the process for them. They should be careful with the timing of this registration, or they may not be able to file their last non MTD return in the way they expected.

Businesses also need to put in place software that will enable them to file their VAT returns. It will no longer be possible to simply type the figures into the old HMRC website as all transfers will need to be digital.

Manual written records are no longer acceptable, records will need to be kept digitally, the two principal solutions available being cloud software or spreadsheets.

Cloud software can take care of the whole process, recording all transactions, often via a bank feed and VAT returns can be filed with HMRC directly from the software. There are various cloud-based options available, my favoured one being QuickBooks which I can offer to my clients at a wholesale price. I also offer training, so you aren’t left to figure it all out alone and the software includes a VAT checker that helps you minimise any errors before you submit.

The alternative option is to use spreadsheets such as excel. The spreadsheet will need to be set up with formula so there is no re-typing of information between sheets etc. You will also need to get what is known as “bridging software” that directly transfers the VAT return figures from the spreadsheet to the HMRC VAT return system, again with no re-typing.

There are some exemptions relating to digital exclusion and for religious reasons. These have to be specifically applied for and HMRC considers them on a case by case basis.

If your business is going to be affected by this and if you haven’t done anything yet, then now is the time to act!

Of course, if you are voluntarily registered and there are no pressing reasons to remain so, there is always the option of de-registration. However, my next article will cover making tax digital for income tax which has similar digital record keeping requirements meaning you will simply be “kicking the can down the road” for a couple of years.

As always, if you need any help with all this the thing to do is contact your accountant who will be aware of the deadlines, the software options and have spreadsheets set up ready for you to use.

Changes to VAT – maybe it is time to register for Making Tax Digital

183:776791144 (Amanda Lodge) — Mon, 07 Jun 2021 16:59:39 GMT

Change is coming

HMRC are in the process of updating their IT systems, some of which go back years. As part of this they are migrating data from their old VAT system to a new "Enterprise Tax Management Platform". Even HMRC are anticipating problems with this according to updates seen by agents. There are likely to be problems both filing returns and making payments.

Filing returns

Many businesses still using the old method of filing a VAT return, where you log on to HMRC and fill in the VAT form online. Many of these businesses do not meet the requirements to sign up for making tax digital because they are voluntarily registered for VAT, their turnover being less than £85,000.

The migration of data is going to mean that this old HMRC VAT portal will no longer work for those whose records have been migrated to the new system. The big problem is that you are unlikely to know when your data will be migrated. The first you will know about it is when you cannot file a return some time between now and November this year when the transfer is expected to be completed.

HMRC have sent out communications regarding this change, but I feel it has been a little confused and the implications not emphasised enough. If you use MTD compliant software, such as QuickBooks already then you should be able to file using that, you will just need to familiarise yourself with how to check and file a return using that software. For everyone else you will need to find a suitable solution.

If your turnover is less than £85,000 you do not actually need to register for MTD until April 22, but you do need to make changes to how you file your returns.

Personally, I have been advising clients to sign up for MTD now. The accounting solutions will be the same, and at least you will know you don’t have to make any further changes in the near future.

The first step is to get appropriate software. All the main online bookkeeping systems will file MTD VAT returns, so QuickBooks, Xero, FreeAgent etc. will all do the job. For those who want a PC based bookkeeping system then VT Software is an option. If you want to stick with your spreadsheets you will need “bridging” software such as Absolute Tax’s VAT filer (there are lots of software solutions listed on HMRC's website), and will probably need to adjust the spreadsheets themselves.

When changing systems, it is always advisable to do it from a clear start date, ideally the start of a financial year, but failing that the start of a VAT quarter. Take care to maintain access to any data on your old accounting systems, especially if you change mid-year, or your accountant has not done your previous year's accounts.

Once you have the software you will be ready for HMRC when they move your data.

You can then sign up for MTD, which is done online and is a relatively simple process, you just need to do it sometime after you have paid a VAT bill and before you desperately need to file your next VAT return as it takes time for HMRC to confirm they have signed you up. You will then know you are compliant for a good few years to come.

Making payments

Businesses affected need to log on to their HMRC business tax account and just check that there is an email address registered on it for VAT. This needs to be a business address and not your agents. HMRC need this for two things. They will need to set up a new direct debit and will also need to notify the business before they take payments each quarter.

Without an email they cannot do these things, so it is really worth checking your VAT payments have been made when you expect them to be in order to avoid any penalties and interest.

Be Aware of Fraud

With all these changes happening just be careful of any emails that appear to come from HMRC. If you suspect phishing, then always remember to log onto your Business Tax Account and check there to see if you owe any money and don’t click links in emails. Anything suspicious can be reported to HMRC.

Please get help if you need it

For some people this is all going to be quite a significant change. If you are not confident with online accounting, signing up to HMRC services, or setting up spreadsheets it would be advisable to get help from your accountant. This could be them taking on doing your VAT returns for you, or just advice and support to set up the new systems and be confident that they are working.

In conclusion

Unfortunately, for many businesses struggling to recover from Covid, this is a whole heap of change at a time when it is probably not welcome.

It also forces the use of technology on businesses and whilst I do believe in the value of that technology it is not what everyone wants. If you are close to retirement and have always kept paper records you simply many not want to digitise everything, unfortunately there is little choice if you remain VAT registered.

Options include controlling the growth of your business so you do not need to be VAT registered or, if you are voluntarily registered you could de-register, but you will need to work out the cost of doing that, especially if you sell zero rated goods such as food or children’s clothes. Again, just speak with your advisor first and check you are doing the right thing for you and your business.

Budget 2021

183:776791144 (Amanda Lodge) — Thu, 04 Mar 2021 18:08:33 GMT

Budget 2021 - Highlights

I have covered the Covid related budget highlights on my Covid page ( https://www.amandalodgeandco.co.uk/resources/covid-19-links-to-helpful-websites ). Here are the main taxation and business investment points. All in all, not much has changed yet. Investment is being encouraged and there are some tax rises in the future, but I think most of us were expecting that. We will have to pay for all the Covid support at some time, lets hope businesses can prosper and it won't be too painful.

Personal Tax

Most personal tax allowances increase slightly for 2021/22 but are then fixed until 5 April 2026, meaning that inflation will erode their value over time. For example, the tax-free personal allowance will be £12,570 from 5 April this year (up by £70) and remain at that level for 4 years. The next £37,700 of income will be taxed at 20%, up from £37,500.

Savings bands, the additional rate threshold, and the £100,000 income level at which the personal allowance starts to be eroded all remain the same. In addition, rent-a-room allowance, trading income, property income allowance, and dividend income allowance all stay the same.

Business Tax

Trading losses (up to a maximum of £2m) arising in 20/21 and 21/22 can now be carried back up to three years. This extends the current one year carry back and could be especially useful to struggling businesses, to get maximum benefit you need to get your accounts done quickly after the year end so any claims for tax refunds can be made.

Corporation tax is to rise for companies with larger profits, but not until April 2023. There will be a £50,000 profit band that will be taxed at the current rate of 19%, the next £200,000 will be taxed at an effective rate of 26.5% assuming profits are less than £250,000. This will be achieved by all the profits being charged at 25% and then “marginal relief” will be granted. If company profits are over £250,000 then they will all be taxed at 25%. Thresholds will be reduced for short periods and where there are associated companies – so splitting your company up won’t work!

From April 2021 Super-deduction for capital expenditure will mean that 130% of qualifying expenditure on new main rate plant and machinery will be available and 50% on special rate assets. The £1m temporary annual investment allowance will remain in place until 31 December 2021.

Payroll

The national minimum wage is to increase to £8.91 from April 2021, so check rates if you pay close to or at the current minimum wage.

Other business development announcements

The government has also announced further grants under their “Help to Grow” service https://helptogrow.campaign.gov.uk/ which teaches skills and aims to help businesses take advantage digital technology.

Conclusion

I feel that this budget should have relatively little negative impact in the coming tax year. The details above only cover a few highlights that I feel will be applicable to many of my clients. As always tax can be quite individual so if you need any more detailed advice please feel free to get in touch.

Shareholder and Partnership Agreements

183:776791144 (Amanda Lodge) — Wed, 25 Nov 2020 18:26:03 GMT

It has been quite some time since I have posted anything here. The Covid-19 pages of my website have had my attention instead.

I thought I would focus on something that I have come across more than once in recent weeks and may be relevant to those of you who may be setting up your own businesses.

It is common for a couple of friends to get together to form a partnership or company, or for one friend to buy into another’s company. They have usually been friends for a long time and are excited by their new venture. At this point no one likes to think about what happens if the relationship comes under strain or even breaks down.

But let’s face it the pressures of running a business can be significant at times.

The problem often lies in the fact that informal arrangements are set up on an equal, 50/50 basis which is fine as long as you agree with one another. When you stop agreeing you are left in a stalemate situation, often where each party has the authority to do what they like!

All sorts of things can happen in life that affect a person’s ability to dedicate time and energy to a business or their decision making attitude or capacity. What if one person gets seriously ill for example?

What happens if you cannot agree on something and one person sets up on their own in competition, taking many of the clients, the stock, etc? Unfortunately, it can happen, leaving someone having lost the benefit of years of financial investment and plain hard graft.

The way to minimise this kind of risk is to have a shareholder or partnership agreement from the outset. This may set out such things as:

how members or partners are to be paid
how much profit is to be retained in the business as working capital
how often management, board and/or shareholder meetings will be held
whether certain transactions can only be entered into with the agreement of all involved, e.g. taking out a loan, buying property, starting legal proceedings etc.
how the business should be split if you do agree to go separate ways.
in what circumstances (such as death, or gross misconduct) compulsory purchase of shares can happen, and who will value the shares.

These are just examples; the list will be unique to each business.

These can be difficult agreements to put in place between long standing friends and hopefully most agreements will never need to be used in time of trouble, but they to help to create a business relationship, help you think about the business you are establishing or buying into and offer a legal framework if things do go wrong.

They can also be re-visited and changed in the future if the need arises, so they are not set in stone.

I do believe it is something worth thinking about.

Life after Government Covid-19 Support

183:776791144 (Amanda Lodge) — Wed, 02 Sep 2020 09:13:02 GMT

The importance of cash flow planning

With the government’s furlough scheme beginning to wind down, grants, no doubt spent or almost spent and many business’s trade not having recovered to pre-Covid levels, now is the time to stop and think about cash flow.

When accountants talk about cash the don’t just mean the coins and notes in the till, they also include the money you have in your business bank account and any overdrafts you have. It is cash flow (the movements of this money in and out) that will make or break a business, even a profitable one. You may have heard the phrase “cash is king” and this reflects that fact.

Some government help may even be causing some cash flow problems. The eat out to help out scheme may have pulled people into restaurants, but the businesses have had to wait (thought not too long) for the cash to hit their bank accounts. The furlough scheme can also cause similar problems now the claims must be made by calendar month, if you do not know how many hours your flexibly furloughed staff will work until the end of the month and/or payday has been reached.

Right now you need to think about whether you are increasing cash each month or losing it and if necessary take action. Remember as well that it may look like you are increasing cash until you get your VAT bill or the corporation tax bill!

Profit and cash flow are not the same. Say you purchased some stock for £400 on 30 days credit. If you sell it on day one for £1,000 and your customer pays you straight away, you make a profit of £600 and have no problem with cash flow. If you sell it on 30 days credit on day 25 then you will make the same profit but you have a cash flow problem – you have to find £400 to pay for the stock before you get any cash from your customer.

This is why it can be important to do a cash flow forecast for your business, and as an owner, for your personal finances, as this will determine how much money you need to take out of your business.

You can often start with your latest profit and loss account as a kind of memory jogger, and a spreadsheet set up with month by month columns showing cash at the start of each month, money in and then all the various items of expenditure going out. Some accounting software, such as QuickBooks also have cash flow functions built in. You can then fill in the figures, putting items of expenditure into the months they actually happen. For example, someone paying business insurance annually will have one big hit in the month it is due, someone paying by instalments will have a monthly amount going out that only changes once a year or if risks change.

Another example is VAT. The bill will depend on income and expenditure for your VAT quarter, say it ends at the end of September. You will have to pay the bill by 10th November if you use direct debit – so there is quite a mismatch between when the amounts arise and when you actually have to pay. Always remember to include all your tax bills in your cash flows.

The one thing you won’t necessarily know in any detail is what your sales will be – but at least doing a cash flow will let you know what they need to be. If you exceed this amount you have something in the bank if there are local lock downs, if you don’t then it’s a first early warning sign to take action.

Depending upon your circumstances it can be frightening, exciting or motivating to do a cash flow, but it is always better to do it as it means you can take action in plenty of time.

Amongst the things you can do are looking for new opportunities or ways of selling your product or service, cutting costs, spreading costs (like paying insurance by instalments – although it may be more expensive in the long run), negotiating with landlords and HMRC to spread large bills. Making sure you are claiming all the grants etc. that are available, and where you have staff, looking at staffing levels. You could also borrow money but you will have to believe you can repay it, or you may have personal savings you can put in but you will need to be convinced it is worth it. It may be better to keep those savings aside and use them to set up again later.

Strangely, for some businesses it is also a time to consider re-structuring, pay rises and bonuses. I have seen a set of accounts for July 2020 where the profit was the same as July 2019 on two thirds of the sales. The message is to be ambitious, creative and retain a degree of optimism.

You can use your cash flow to experiment with any of these options and see what effect they have. It is also worth a regular review and comparison with what actually happens.

There are tough decisions and tough times ahead for may but, where money is concerned, a cash flow will mean you are fore-armed and fore-warned so you can plan ahead.

It goes without saying that your accountant will be able to help you with cash flow planning and the fees may well be worth the investment if you do not have the confidence to do it by yourself.

New Sole Traders – you can’t get any Covid-19 help from HMRC but could you claim tax back?

183:776791144 (Amanda Lodge) — Tue, 19 May 2020 14:46:48 GMT

I have posted on this subject before, but I think it is even more relevant now than ever given our current circumstances and the long haul ahead of us all to return to life as normal.

If you have a new sole trade that you started in the tax year from 6 April 2019 to 5 April 2020 you will not be eligible for Covid-19 assistance from the government, but you could be due a refund of tax if your business has made a loss in the period to 5 April 2020.

Not something the government has been publicising!

There is a danger that you will be encouraged by our tax system and (if you are one of the many who’s business has suffered significantly due to Covid-19) a need to save money, to do your own tax return and use what is called the cash basis to prepare your accounts, it is much simpler than the alternative and may make sense for many. However, it does prevent you from claiming most of the loss reliefs that are available.

So, it is worth thinking before you do so. If you were employed during the three years before you set up your business and paid tax on those earnings you may well be able to claim some of that tax back if your business has made a loss, but you will need to use accruals accounting and need the help of an accountant to make the right claim.

In calculating the loss, you can even include the value of capital items, like vans and equipment as you will be able to claim what is known as capital allowances on such items.

Last year I claimed about £2,300 back for a client – I did not charge him anywhere near that to do it, there is no point if there is no win for my client.

What is more the tax that is returned is treated as income of the year any salary was earned in so it should have no effect on any current benefit claims (other than it will affect the level of your savings).

The first accounts you get taxed on as a new sole trader are from when you started to 5 April 2020 – this is a rule for everyone, so your first tax return can be prepared and submitted now, meaning you get your tax back sooner rather than later.

If you think these circumstances may apply to you why not arrange a free, no obligation video chat to see if I can help.

Covid-19 – Planning for a Marathon

Tue, 17 Mar 2020 17:37:44 GMT

The government keep saying nothing like this has been seen in a generation, but I think it is way longer than that and this is global. It is very likely that we are in for an extended period of war on this virus and that will undoubtedly leave financial struggle and stress stacked on top of mounting health concerns for ourselves and especially for our loved ones.

Despite a big announcement in the budget there are many small businesses that are set to suffer over the coming months as they manage to fall outside of any of the criteria for help, although these have literally just been widened.

The government has published the following: https://www.gov.uk/government/news/coronavirus-covid-19-guidance-for-employees-employers-and-businesses. Unfortunately, much of this information is sketchy so everyone will have to keep an eye out for updates. Remember to keep in touch with your local council as well as it is intended that some help will come via that route. At the moment it seems all aspects of government are geared toward helping the sick.

If you are an employer, then Statutory Sick Pay (SSP) can be claimed from day one of sickness if it related to Covid-19 and meets relevant conditions. The government is currently in the process of setting up a way of making claims under these new rules as current payroll software won’t work. Hopefully we will hear about that soon.

The self-employed will have quicker and easier access to benefits than in normal circumstances.

There is also assistance tied in with certain trades and with business rates, but not all businesses pay these rates.

With problems already setting in for some and serious concerns on the horizon business owners need to do as much as they can to keep their businesses in existence, even if that means some tough decisions. Here are some action points.

For many it will be scary, but it is important to look at how long the business can survive with reduced activity. Now more than ever is the time to stay on top of those numbers.

Look at your “burn” rate – the rate you are using any cash or loan facilities you have. What can you do to reduce that burn rate?

Cut costs wherever you can. Unfortunately, this may mean making staff redundant, or maybe they will agree to work shorter weeks for less money? Quick decisions can save businesses, so they exist to take on more staff when things improve. This will be a massive moral dilemma for many business owners, but you will not be alone.

Think of other costs that can be cut back, whilst asking staff to work from home may not cut the rent bill it does mean office electricity and tea bills go down! Try and get creative. Your staff themselves may have some good ideas.

Cut out any unnecessary spending – maybe the coffee machine needs to go on holiday?

Maximise the revenues you are getting.

Look at what you sell – are some things just not worth it? If you make a loss or a very poor margin on anything now is the time to work out why it is still on offer.

Can you change your business to adapt to the circumstances? Can you take it online for example? Or can you adapt what you offer to meet the needs of a population trapped at homes?

Other ideas I have already come across include using your assets for a different purpose, for example, if you find yourself unable to distribute your own goods but have a fleet of vehicles could you deliver for other businesses? Or if you run a catering company does your licence allow you to do takeaways? It is time to get creative and keep in touch with new needs that will no doubt arise as we “lock down”.

It is important to look at cash flow and identify any “crunch” points. Quarterly rent bills are often difficult. It is often better to speak to your creditors and negotiate revised terms before you miss a payment.

HMRC are being more flexible concerning tax bills. There is a dedicated helpline you can call to negotiate time to pay - 0800 0159 55. Remember to call before the tax is due. You will still be expected to pay the tax and will be asked how much you can pay and when.

Check your insurance policies, you may have cover for some loss of trade. The government has just clarified the situation and widened the scope for claiming, despite the fact that they have not ordered certain businesses to close.

Keep in touch with central and local government websites and be ready to act and claim any help on offer.

Take care if you do take out a government backed loan. It is a loan and will need to be repaid. Be especially careful if you are a sole trader or if you are asked to sign a personal guarantee for the loan.

Grants are not loans so if you qualify make sure you claim.

If you get in trouble, then seek advice. Continuing to trade, e.g. buying new stock when you know you cannot pay the supplier is called fraudulent trading and can lead to serious legal consequences that could damage your ability to set up and start again after this is over.

Look at your own personal spending, where can this be cut back?

Plan for the long haul. It is likely to be 18 months or 2 years before there is a vaccine for this virus, we are likely to see outbreaks for some time to come.

Above all keep in touch with others, friends, family and colleagues, I know it will be phone calls and Skype for many, but it will really help. I will keep this blog updated with links to relevant government guidance on a weekly basis.

I have also started a web page with links to useful information at https://www.amandalodgeandco.co.uk/resources/covid-19-links-to-helpful-websites

Its Time To Plan

Fri, 28 Feb 2020 15:22:49 GMT

With the tax year end nearly upon us there is still time to minimise your tax bill

So, it feels like you’ve only just filed your tax return but now is the time to do your last minute planning for the current tax year that ends on 5 April 2020.

There are various things that can be done to maximise the use of your personal allowances and basic rate allowance.

Here is a run down of things to consider:

If you have a low income you may not have used all your tax-free personal allowance for the year. If you run a business in the form of a company and have made a profit maybe you could extract more from it without paying any tax. Alternatively, you may be able to pass some of the allowance to your spouse.

On the other hand, if you are lucky and earn over £100,000 you will be starting to lose your personal allowance, an annual bonus may have pushed you over the £100,000. It may be worth considering a pension contribution – at least you will be putting money aside for your future rather than giving it to the tax man.

If you are a director of your own company now is the time to get your books up to date. Get your accountant to look at them before the end of March so you have time to vote and pay payroll bonuses or dividends.

If you, your business or your company have surplus cash pension contributions can save tax whilst helping you save for your future.

Alternatively, for individuals, now could be the time to top up your individual savings account (ISA)- cash based ones don’t make as much sense as they used to but if you are planning an investment based ISA you can protect any future capital gains from tax.

If you are in the first three years of a new sole trade or partnership and have made losses, there may be the opportunity to gain tax relief from your income before you started trading. This means you could get a repayment of tax. So it is worth getting those accounts up to date and getting a free consultation with an accountant.

It is also a good time to plan beyond 5 April in order to minimise future tax bills – again here are some things that can be done.

Have family members been volunteering in your business? If so could you employ them? The wages will be tax deductible for your business and f your relative has a low income their tax rate may be lower than yours.

Could you share income more effectively between partners in order to minimise any child benefit tax charge?

If you are married, then assets can be passed between you without immediate tax consequences meaning that assets that generate income could be moved away from one spouse to another who has a lower tax rate.

In conclusion

There are all sorts of “catches” in the rules and there may be unintended consequences of taking certain actions, so it is important to get professional advice with any tax planning. I’m always happy to have a free consultation with prospective clients just to see if I can help.

Could you claim a tax refund?

Fri, 03 Jan 2020 16:38:02 GMT

If you have a sole trade or partnership maybe you can.

You may have recently filed your 2018/19 tax return or may be just about to do so.

You may have been tempted to use the simplified form of accounting known as cash accounting for your sole trade or partnership, but there are circumstances in which this could be very much to your disadvantage.

Take for example someone who is in their first period of trading and has spend a lot on assets such as a van and some expensive equipment necessary to carry out his or her work, an electrician, gas fitter, cleaner or dog walker for example. The capital equipment may mean they have made a loss for tax purposes.

Using a cash basis to prepare you accounts means you can only do one thing with the loss, and that is carry it forward. If you have a new business it may be that in the next tax year you won’t earn much more than the tax free personal allowance, so if you didn’t have to carry losses forward you wouldn’t pay any tax anyway.

What if you could get relief for the loss against other income, even income from prior years?

If you use accruals accounting and have other income, say a salary in the same year or in any of the previous 3 years you may be able to do just that and get paid back tax from previous years. I have recently put in a claim for someone who stands to get in the region of £2,000 back!

Everyone’s circumstances are different, so it is important to get advice specific to you in order to minimise your tax bill overall.

Are there other circumstances in which I can carry losses “backwards” or “sideways”?

Yes, definitely! There are “sideways” loss reliefs for sole trades and partnerships available if you have other taxed income in any tax year and other loss carry backs for ongoing trades and some specific to the first three years of a new sole trade or partnership.

What you can do

Most accountants are happy to give a free consultation so if you think you need to take advantage of any of these loss reliefs book yourself an urgent appointment to see if you qualify and get a fee quote – you could be quid’s in. Why not get in touch?

Child benefit and National Insurance Credits

183:776791144 (Amanda Lodge) — Wed, 20 Nov 2019 14:29:48 GMT

Are you losing out?

As it is the time of year when people are filling in their tax returns, I thought I would write about the impacts that child benefit claims can have and help stop you missing out on a valuable aspect of claiming.

Some of you will be aware that if, as a couple one of you earns over £50,000 then the higher earner must pay back some child benefit if they or their partner has claimed it. This even applies if the children in question are not the higher earner’s children. If the higher earner is earning £60,000 or more all the benefit will have to be paid back to the government.

This is one of the areas of tax where the term partner includes people who are not married or in a civil partnership, but who are living together as if they were.

If one of you is lucky enough to be earning over £60,000 it is easy to think that simply not claiming child benefit solves a problem. After all it avoids the need to do a tax return.

However, this may not be the best thing to do. If the “lower paid” partner is either not earning at all, or if their income is less than the lower NI thresholds (they are different depending upon whether they are employed or self-employed) then it is more sensible to claim.

It is possible for the lower paid or unpaid partner to make a claim for child benefit and then ask for it to not be paid (only do this if one of you earns over £60,000). This means there is no requirement for a tax return and no money to return, but it does register the claim.

The reason for this is that claiming child benefit for a child up to the age of 12 earns the person claiming a “national insurance credit”. Each of us needs to collect 35 full year credits (you can only get one a year) in order to qualify for a full state pension. Whilst the pension is not a huge amount of money it can be a significant help with pension planning.

So, before you stop a child benefit claim, or decide not to claim for another reason, check that you are earning your credit for the tax year through your salary or by some other means – or you could lose out!

Its Party Planning Time

Thu, 24 Oct 2019 15:25:50 GMT

Its Party Planning Time

With Christmas party season approaching, here is a reminder of the rules concerning staff entertaining.

Expenses and tax – Staff Entertaining

Many businesses have an annual Christmas party, and those that skip this party often arrange other annual events during the year for their staff.

The tax rules recognize that keeping your staff happy is an important aspect of running a business so VAT can be reclaimed on the costs of staff entertaining where you have a valid VAT receipt and the net cost is also deductible from profits when you come to work out your business tax bill. As a result, it is always worth distinguishing the cost of staff entertaining from client entertaining when doing your bookkeeping as the same is not true of other business entertaining expenses. The party must be open to all, although you can have separate events at different locations if your business has multiple locations.

Where care needs to be taken is in controlling the overall cost per head of all staff entertaining in any given tax year (6 April to the following 5 April). If the cost, including VAT, per member of staff exceeds £150 in a tax year then the employee will end up getting taxed on some or all of the amount spent. That does not go down well with staff!!

The “overspend” must be reported on forms called P11d’s. If you are not aware of the need for this it can cause a further problem as often your accountant won’t know about it until after the filing deadline for the P11ds, meaning that your business could be liable for fines and penalties as well.

It is therefore important to keep a tack of how much you are spending on staff entertaining and keep to a budget. The limit is an annual spend, so you could have two events costing up to £75 each or any other combination, they just need be annual events.

The rules can get rather complicated if you have a mixed event for staff and non-staff so check with your accountant to see what can and cannot be claimed.

Its Tax Return Time Again

Thu, 26 Sep 2019 17:44:46 GMT

If you have untaxed income now is the time of year to think about getting your tax return done, before it gets busy for Christmas. Doing it now will also help you budget if you have a tax bill to pay at the end of January when things are tight for a lot of people.

HMRC offer a useful online checker so you can figure out if you need to do a tax return. It can be found here https://www.gov.uk/check-if-you-need-tax-return.

You will need a UTR or Unique Tax Reference in order to file a return. This is a ten-digit number issued by HMRC, on some of their correspondence they put a three digit tax office reference in front of it. You may already have one if you have completed a return in the past, if not apply right away.

Where you apply depends on whether you are self employed or not.

https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-not-self-employed

https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

Don’t worry if you are late registering, if your return is completed on time and you pay your tax this should not cause any problem.

If your affairs are simple you may want to complete your own tax return online. HMRC’s website leads you through a series of questions that tailor your tax return. You then fill in the details of your income and expenses and once everything is ticked off and complete HMRC will show you how much tax is due and you can file your return.

If your affairs are more complicated or if all the terminology is too confusing, you may want the help of an accountant. In addition, there are now various allowances that can be claimed if you want, but there may be good reason not to claim them. There are also options about cash basis or what is known as “accruals” or “invoice” basis for the self-employed. An accountant can help you decide what is best for you.

Using an accountant can take a lot of the stress away, all you need to do is send us your paperwork and we’ll sort it out, interpret what it all means, claim everything you are entitle to and help you plan for the future.

Van Benefit 2019/2020

Thu, 05 Sep 2019 14:17:09 GMT

Just what are the rules when it comes to company vans?

The headline figures for 2019/20 are that the van benefit is £3,430 and fuel £655, but how do they get applied?

Is a van or a car being provided?

If you are self employed and you provide yourself with a van, there are different rules. Van benefit rules apply to the self-employed providing vans to their employees and to companies providing vans to directors and employees.

The vehicle provided must be a van from HMRC’s point of view.

We usually look at the list of vehicles HMRC considered to be vans for VAT purposes. The basic rule is that the vehicle needs to be able to carry a payload of at least 1 tonne.

Historically there have been disputes where seats for passengers, in addition to the normal front seats, existed. This led to the development of VW Kombi and Vauxhall Vivaro models with removable seating in the payload area.

For VAT purposes these currently remain on HMRC’s list of vans but Coca Cola have recently lost a tax case. HMRC have ruled that their VW vehicles should be assessed as cars and not vans for benefit in kind purposes, costing the employees and employers a lot of money. The basis for doing this was to do with the suitability of the vehicles for carrying passengers.

If you have vehicles with removable seating in your fleet, then you should seek professional advice.

Is there private use?

For a van benefit to be assessed there must be private use beyond business journeys and commuting to temporary workplaces. HMRC will also allow insignificant private journeys, meaning occasional short detours. If you are in doubt this is an area for professional advice.

How much is treated as a benefit?

If there is private use, the basic van benefit of £3,430 applies. If the employer provides fuel for private journeys, then the £655 will also be assessed.

How much tax is due?

The value of the benefit is effectively added to an employee’s taxable income, so either £3,430 for just the van or £4,085. This gives a basic rate taxpayer a bill of £686 or £817 with fuel. Multiply by two if tax is paid at 40%.

For employers there is a national insurance cost of 13.8% of the benefit in kind.

Payment of van benefit is usually taken account of by the PAYE system, so van drivers do not get extra tax bills unless they need to do tax returns for other reasons. Employers can payroll the benefits or report them annually and will have an annual NI bill to settle.

Help and advice

Please don’t hesitate to get in touch if you are a business owner needing advice about company vans.