Archive for the ‘Uncategorised’ Category

Investing in new equipment?

Tuesday, April 23rd, 2019

For most of us in business the recent, and continuing, Brexit fiasco has meant that making meaningful investment decisions has proved to be problematic. What will our future trading relationship with Europe look like and how will that affect our own trading results?

And yet in the UK we have an extremely generous tax allowance, aptly called the Annual Investment Allowance (AIA), that means we can write off the full cost of qualifying assets against our profits for tax purposes.

Although many small businesses are now incorporated those who still trade in partnership or as a sole trader and pay income tax on profits at the 40% or 45% rate, could see a significant tax saving by utilising the AIA.

The current scope of the AIA is set out in a summarised form below:

  1. You can claim AIA on most purchases of plant and other equipment, computers or commercial vehicles.
  2. You cannot claim AIA for the acquisition of cars, items you owned for another reason before you started using them in your business, or items given to you or your business.
  3. From 1 January 2019 to 31 December 2020, the amount you can claim under the AIA is limited to £1m.
  4. You can only claim the AIA in the accounting period when you bought the item. The date bought is defined as when you signed the contract to purchase – if payment is due within four months – or when payment is due if it’s more than four months.
  5. If your business closes you cannot claim the AIA in the final period of trading.

If you are considering an investment in new plant – and don’t forget that you should have a compelling commercial reason for making the investment – any tax relief is a welcome bonus. Please call so that we can help you quantify how much tax benefit you would be entitled to and also look at the wider commercial rationale for making your investment.

When do you pay capital gains tax?

Thursday, April 18th, 2019

If you personally disposed of an asset that is subject to a capital gains tax (CGT) charge, at any time during the tax year ending 5 April 2019, any CGT due will need to be paid 31 January 2020.

Accordingly, if you know the amount of the taxable gain, and the amount of CGT payable, you still have more than ten months to organise the funds to pay the tax.

Hopefully, when you sold the asset you were advised of the likely tax charge and reserved funds from the sale proceeds to settle the liability; after undertaking the necessary research – or professional advice – to claim any available exemptions or reliefs?

And there is still time to consider CGT planning.

Although the stable door has been closed – the gain has crystallised during the 2018-19 tax year, claims for any reliefs can still be made as part of your self-assessment return for 2018-19.

It is beyond the scope of this article to list all the reliefs that can be claimed to reduce a CGT bill, but we can help you consider your options. Please call for advice. We will need to know the following details to better consider these options:

  • A description of the asset(s) sold,
  • The disposal proceeds,
  • Any costs associated with the sale,
  • The date and costs of the purchase of the disposed assets.
  • Any costs you have incurred since acquiring the asset that have improved it in some way: for example, an extension to a property.

You have plenty of time to plan for the payment of your CGT liability for 2018-19 – latest date to pay is 31 January 2020 – and we recommend that you fully consider your planning options before submitting your 2018-19 tax return.

If you don’t submit an annual tax return, you will need to submit details to HMRC using the “real time” capital gains tax service. The following instructions on this option are reproduced below. However, even if you use this option, it is still advisable to take professional advice on the computation of the chargeable gain to ensure you only pay what is due and no more.

You can use the ‘real time’ Capital Gains Tax service if you’re a UK resident. You’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you report and pay. When you use the service, you’ll need to upload PDF or JPG files showing how your capital gains and Capital Gains Tax were calculated.

When to report

You can use this service as soon as you’ve calculated your gains and the tax you owe. You do not need to wait until the end of the tax year. You must report by 31 December after the tax year when you had the gains.

After you’ve reported your gains, HMRC will send you a letter or email giving you a payment reference number and telling you ways to pay. Do not pay your Capital Gains Tax bill until you’ve received your payment reference number.

What is a Debt Relief Order?

Tuesday, April 16th, 2019

The first Debt Relief Order (DRO) was approved 10 years ago in April 2009 with the aim of assisting people with small levels of assets and little surplus income deal with their debts*.

Since then, the Insolvency Service has approved more than 254,000 DROs to people with debts worth an average of £9,400.

People apply for a DRO through an authorised debt adviser, from organisations such as Citizens Advice, StepChange and PayPlan, who submit applications on-line to the Official Receiver on their client’s behalf.

Approximately 99% of DROs are approved within 48 hours of the application being received into the team in Plymouth and 2018 saw the Insolvency Service issue approximately £312 million of debt relief – the largest amount for a single year.

A DRO normally runs for 12 months after which the debts are written off and between 2009 and 2017, while 64% of DROs were granted to women, both genders experienced similar levels of average debt – £9,200 for women compared to £9,100 for men.

In the same period, 25% of DROs were granted to people aged between 25 and 34. London experienced the lowest rate of DROs in every year since 2009 – 3 per 10,000 adults – compared to both the North East and South West where the average rate of DROs per 10,000 adults was 7.8.

In October 2015, the upper limit for qualifying debt was raised from £15,000 to £20,000, and the asset limit was raised from £300 to £1,000.

There are 12 competent authorities: Angel Advance, Advice UK, Christian Against Poverty, Citizens Advice, CMAS, Debt Advisory Centre, Insolvency Practitioners Association, Institute of Money Advisors, Money Advice Trust, PayPlan, Shelter and Step Change.

Readers of this post who feel that their management of personal debt is running away from them, should contact one of the above support organisations to see if a DRO would be available.

Can\’t pay your tax?

Friday, April 12th, 2019

A reminder that HMRC may consider extended options for settling your outstanding tax bill. The key is to contact HMRC, explain why you can’t pay on time, and discuss how you can settle any outstanding liabilities.

If you can’t pay before the deadline, call the Business Payment Support Service. Anyone can use this service, not just businesses.

Business Payment Support Service

Telephone: 0300 200 3835
Monday to Friday, 8am to 8pm
Saturday and Sunday, 8am to 4pm
 

Nominated partners in business partnerships can negotiate time to pay with HMRC on behalf of the partnership or individual partners.

If you’ve missed your payment date

 

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter.

Call the Business Payment Support Service if you haven’t received a bill or letter about payment yet.

 

Self-Assessment

 

Call the Self-Assessment helpline if you’ve missed your payment date.

 

Telephone: 0300 200 3822
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm

Green light for pension dashboards

Friday, April 12th, 2019

The government has given the green light to allow pension providers to create user-friendly services that display pension information for individuals on-line.

Savers will be in the driving seat with all the facts and figures about their pensions and potential retirement income at their fingertips in one place for the first time – on smartphones, tablets and computers.

Work and Pensions Secretary Amber Rudd said:

With record numbers saving for retirement as a result of our revolutionary reforms, it’s more important than ever that people understand their pensions and prepare for financial security in later life.

Dashboards have the potential to transform the way we all think about and plan for retirement, providing clear and simple information regarding pension savings in one place online. I’m looking forward to seeing the first industry dashboards later this year.

Key details of the government’s plans, published today in its response to a consultation on dashboards, include:

  • a commitment to bring forward legislation at the earliest opportunity to compel all pension providers to make consumers’ data available to them through a dashboard,
  • an expectation that the majority of schemes will be ready to ‘go live’ with their data within a 3 to 4 year window,
  • confirmation that State Pension information will be included as soon as possible,
  • dashboards will help to reconnect people with ‘lost’ pension pots, benefitting savers and providers.

Ministers support the development of multiple industry-led dashboards displaying the same basic information. Industry have told government that initial models will be developed and tested from this year. A non-commercial dashboard will be delivered and overseen by the new Single Financial Guidance Body (SFGB).

An industry delivery group will be brought together by the SFGB which will set out a clear timetable and roadmap to drive progress towards fully operational dashboards, setting standards and ensuring security to protect users and their information.

Tax-free property and trading allowances

Tuesday, April 9th, 2019

Since April 2017, you can earn £1,000 from a trading activity and £1,000 of property related income, without being liable to income tax.

These tax-free allowances on property and trading income are useful as families can generate an extra £2,000 a year of income without increasing their tax bills.

Obviously, these small amounts will not be a replacement for your day-job, but they do contribute to financing your monthly bills.

What property income could this cover?

You could rent out:

  • your drive as a parking space if you live in an area where parking spaces are at a premium,
  • a part of your garden as a paddock or allotments if you have the space.

One interesting aspect of this relief is that if you own property jointly, both parties are eligible for the £1,000 property allowance to set off against their share of the gross rental income.

What trading income could this cover?

The scope for using the £1,000 trading allowance are perhaps easier to exploit. Any hobby where you have an opportunity to sell goods produced, for example:

  • internet sales
  • craft products
  • hiring power tools
  • or any service related activity, mobile hairdressing, gardening support, babysitting.

If you do claim either of the above allowances, you cannot claim any expenses related to the activity.

Also, you cannot claim the allowances if the property or trading income is linked to a company, partnership to which you are connected, or your employer or the employer of your spouse or civil partner.

Record keeping

Even though there may be no tax consequence, you are still required to keep a record of your income covered by these allowances.

And one final note, these miscellaneous income sources may also affect your eligibility for benefits and tax credits.

What will HMRC avoid telling you?

Friday, April 5th, 2019

There are three things that you can count on that HMRC will do:

  1. Calculate the amount of tax you owe based on the information they have gathered.
  2. Chase you for payment of this tax if not recovered by PAYE.
  3. Pursue you if they believe you have under-declared your taxable income or made excessive claims to reduce your tax.

What they will not do is advise you to maximise the benefit of reliefs and allowances to which you are entitled to claim.

HMRC rely to some extent on the age-old principal that ignorance of the law is not, in most cases, a valid excuse for not obeying that law.

Stretching that principal to an extreme, if we want to make sure that we are complying with tax law, we should read it before earning profits or income. As most students of tax law will confirm, this is a full-time endeavour, and not one you can effectively undertake as well as your day job.

It is possible for any taxpayer to call HMRC, or to visit their website to check out responsibilities, but it’s difficult to do this if you have no idea what questions to ask.

The grey areas, the tax reduction strategies that the law allows, you will have to discover for yourself. Which is fine if you know what you can claim, but what if you don’t know?

HMRC will merely apply the facts as they are presented. In some respects, the tax profession intervenes to ensure that their clients make the most of the tax allowance and reliefs available, thus relieving HMRC of the responsibility to ensure that you only pay the minimum tax demanded by legislation.

If you are concerned that you may be overpaying tax, please call so that we can discuss your options.

 

Retaining business records

Wednesday, April 3rd, 2019

Sole traders

If you are self-employed, and obliged to submit a self-assessment tax return, you must keep your tax records for at least five years after the 31 January submission deadline of the relevant tax year. For example, if you submit your 2018-19 tax return online on or before 31 January 2020, you must keep your records until at least the end of January 2025. Records for this purpose include those relating to personal income etc.

If you send your tax return more than four years after the deadline, you will need to keep your records for fifteen months after you submit your tax return.

If you keep your tax records on a computer, make sure you have sufficient backups of your data to meet these requirements. If you change software during the record retention period, you may need to print relevant reports if you are unable to maintain access to data backups.

Limited companies

If you run your business as a limited company you must keep records for six years from the end of the last company financial year they relate to, or longer if:

  • they show a transaction that covers more than one of the company’s accounting periods,
  • the company has bought something that it expects to last more than six years, like equipment or machinery,
  • you sent your Company Tax return late, or
  • HMRC has started a compliance check into your Company Tax return.

If you are not in business, the minimum period is 22 months after the 31 January filing deadline and at least 15 months after filing if later.

GDPR

The new data protection regulations require that you don’t keep the personal data of your customers, staff or other contacts beyond the date required by law that they be retained.

Keeping this data online or in dusty boxes indefinitely is no longer an option, you risk heavy fines if you do.

Most online document management systems now have a filter process that will help you manage this search and destroy requirement. As for the storage boxes, you will have to resort to a more hands on approach.

Spring Statement March 2019

Wednesday, April 3rd, 2019

The following comments were written on the 13th March 2019 immediately following Philip Hammond’s presentation of the 2019 Spring Statement to Parliament. In theory, the government uses the Spring Statement to respond to the most recent forecasts made by the Office of Budget Responsibility (OBR).

However, what follows is a short summary of the points Philip Hammond did raise.

Employment

  • Since 2010 there are more than 3.5m more people in work.
  • Employment is forecasted to increase by a further 600,000 by 2023.

Public finances

  • Debt fell last year and is forecast to fall continuously to 2023-24.

Tech and the new economy

  • In response to a government sponsored consultation, moves are afoot to update competition rules and increase competition in the digital economy.
  • The tech market place will be encouraged to allow smaller firms to participate.
  • Regulation may be introduced to make users’ personal data portable. For example, transfer lists of friends to new platforms and search engine histories to new search engines.

Border access

  • From June 2019, citizens of a number of non-EU countries will be able to use e-gates at UK airports and border crossing points.
  • The process of abolishing landing cards will also commence from June 2019.

Clean growth

  • Government is to explore schemes to encourage energy efficiencies for smaller businesses.
  • Developers will need to build in increases in biodiversity.
  • The decarbonisation of gas supplies is to be increased by using green gas suppliers.
  • From 2025 new homes will need to meet new low energy standards.

Housing and infrastructure

  • The government is on track to increase housing supply to its highest level since 1970 by the end of this parliament with an average of 300,000 properties a year.
  • A number of new steps were set out in the Spring Statement including the use of the Housing Infrastructure Fund and the Affordable Homes Guarantee Scheme to help the supply of more new homes across the country.

National Living and National Minimum Wage changes

  • The government has tasked the Low Pay Commission to make recommendations for changes to these rates to apply from April 2020. A response is required by October 2019.

BREXIT update

Wednesday, April 3rd, 2019

The last few weeks have seen some of the most extraordinary political manoeuvrings in the UK parliament, and as we complete the edit of this article, the EU parliament seems to have given us a few extra weeks to complete the withdrawal agreement and get a final draft agreed by parliament. The formal statement issued late last night (22 March 2019) says:

“The European Council agrees to an extension until 22 May 2019, provided the Withdrawal Agreement is approved by the House of Commons next week,” the statement from EU leaders said.

“If the Withdrawal Agreement is not approved by the House of Commons next week, the European Council agrees to an extension until 12 April 2019 and expects the United Kingdom to indicate a way forward before this date for consideration by the European Council.”

Over to you Mrs May…

Latest Blog
23
Apr

Investing in new equipment?

For most of us in business the recent, and continuing, Brexit fiasco has meant that m...

Read More
18
Apr

When do you pay capital gains tax?

If you personally disposed of an asset that is subject to a capital gains tax (CGT) c...

Read More
16
Apr

What is a Debt Relief Order?

The first Debt Relief Order (DRO) was approved 10 years ago in April 2009 with the ai...

Read More
12
Apr

Green light for pension dashboards

The government has given the green light to allow pension providers to create user-fr...

Read More

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