COMMUNITY INTEREST COMPANIES (CIC) – DID YOU KNOW?

A CIC is the usual legal entity for operators of a social enterprise that is non-charitable.

A CIC can be set up as a normal company ie as a company limited by shares or a company limited by guarantee.

A CIC enjoys the benefit of limited liability.

A CIC must undertake an activity that fulfils a social purpose.

A CIC is allowed to pay a salary to its directors.

Paid directors are allowed to be members of the Board.

A CIC can issue loans and bonds but there may be restrictions on the amount of interest that it may pay.

A CIC can issue shares but there are restrictions on their disposal and the amount of any dividends it may pay.

Assets of a CIC may only be disposed of at open market value and the proceeds used for community purposes.

If a CIC is wound up its assets must be transferred to another body with the same restriction on asset disposal.

A CIC is covered by the same tax regime as a normal company.

A CIC is required to file its accounts at Companies House each year.

A CIC is required to file a separate report at Companies House each year detailing aspects of its activities.

If you consider we may be able to assist with the operation of your CIC or in your decision as to whether a CIC would be appropriate for you please contact us. 0116 2423400 

Richard Jeffreys, Senior Audit Manager 

When Do I Have To Register for VAT?

If you are aware of an increase in turnover, or are unsure about whether you should be VAT registered or not, the following points should help:                                                      

  • If your turnover exceeds the registration threshold of £85,000 over a rolling 12 month period then you will need to register for VAT; you will then need to calculate at what point your turnover broke this threshold.
  • Once you know when you exceeded the registration threshold, you need to register by the end of the following month. For example, if the threshold was breached on 31 August, you have to register by 30 September and will be registered from 1 October.
  • If you expect you will breach the registration threshold in a single 30 day period, you must register for VAT immediately.
  • If you are late registering for VAT, then you must pay what you owe from the point at which you should have registered; as well as interest there may be penalties which depend on what you owe and how late your registration is.
  • It is possible to get an exception from registering if your turnover goes over the threshold temporarily. To do this you need to write to HMRC with evidence as to why you believe your net turnover won’t go over £83,000 (de-registration threshold) in the next 12 months. HMRC will then respond confirming whether an exception has been granted or not – this is not always guaranteed – and if denied, they will register you for VAT.
  • You can also register at any point voluntarily – you must pay HMRC any VAT you owe from the date that you become registered.

If you are unsure, there is a helpful link online (www.gov.uk/vat-registration/overview) which explains in further detail the steps you should take when registering for VAT.

If you have any queries or concerns with regards to any aspect of VAT, feel free to give our office a ring on 0116 242 3400 and we will be happy to discuss this with you. 

Jake Dempsey, Accounts & Tax

When Do I Have To Register for VAT?

If you are aware of an increase in turnover, or are unsure about whether you should be VAT registered or not, the following points should help:                                                   

  • If your turnover exceeds the registration threshold of £85,000 over a rolling 12 month period then you will need to register for VAT; you will then need to calculate at what point your turnover broke this threshold.
  • Once you know when you exceeded the registration threshold, you need to register by the end of the following month. For example, if the threshold was breached on 31 August, you have to register by 30 September and will be registered from 1 October.
  • If you expect you will breach the registration threshold in a single 30 day period, you must register for VAT immediately.
  • If you are late registering for VAT, then you must pay what you owe from the point at which you should have registered; as well as interest there may be penalties which depend on what you owe and how late your registration is.
  • It is possible to get an exception from registering if your turnover goes over the threshold temporarily. To do this you need to write to HMRC with evidence as to why you believe your net turnover won’t go over £83,000 (de-registration threshold) in the next 12 months. HMRC will then respond confirming whether an exception has been granted or not – this is not always guaranteed – and if denied, they will register you for VAT.
  • You can also register at any point voluntarily – you must pay HMRC any VAT you owe from the date that you become registered.

If you are unsure, there is a helpful link online (www.gov.uk/vat-registration/overview) which explains in further detail the steps you should take when registering for VAT.

If you have any queries or concerns with regards to any aspect of VAT, feel free to give our office a ring on 0116 242 3400 and we will be happy to discuss this with you.

Jake Dempsey 

Accounts & Tax 

RESTRICTION ON INTEREST RELIEF ON RESIDENTIAL BUY TO LET PROPERTIES

As many owners of rental properties will be aware, from 6 April 2017 there is a restriction on the tax relief available on mortgage interest on residential Buy to Let (BTL) loans. The restriction, which is being phased in over 4 tax years to 2020/21, will eventually limit tax relief to the basic rate of income tax, currently 20%.

For a 40% tax payer (usually taxable income over £44,000) the staggering of the restriction means that over the next 4 years, tax relief on interest will be reduced by 1/8 each year to 50% of its 2016/17 level by 2020/21. For example, a 40% taxpayer paying £2,000 in BTL mortgage interest each year will currently be entitled to £800 of tax relief; this will reduce by £100 a year to £400 by 2020/21. As income is assessed before interest is deducted, more people will find themselves in the 40% tax bracket.

This, combined with the extra 3% Stamp Duty applying to additional residential homes being purchased, amounts to a significant increase in the tax burden relating to owning residential rental property.

The tax relief restriction does not apply to companies letting residential properties, so we are experiencing an increase in requests by individuals and couples wishing to set up a limited company to acquire properties they would like to buy for rental purposes. However, the increase in Stamp Duty still applies and commercial BTL mortgage rates tend to be higher than personal rates.

In some very restricted circumstances, it is possible to transfer existing rental properties into a limited company, taking advantage of incorporation relief to hold over Capital Gains, and in even more limited cases, to avoid payment of Stamp Duty on such a transfer.

If you would like to know more, please email peter.morris@torrwaterfield.co.uk or call 0116 2423400

Tax investigations: What to do when HMRC comes knocking

Your business could be picked out of a hat for a tax investigation.  However, the Taxman now has extremely sophisticated software and tools to analyse your accounts and tax returns.  These days it is more likely that a business will be quickly and easily targeted for an investigation if it stands out for any of the following reasons:

  • Late filing of tax returns
  • Unpaid tax liabilities
  • Errors or omissions on tax returns
  • Fluctuations in tax returns (a drop in income, or increased costs)
  • You receive a tax refund (common for VAT returns where sales are zero rated)
  • Your income levels do not match the ‘norm’ for your business sector
  • Exceeding turnover thresholds for various tax schemes and not acting accordingly
  • You work in a high risk industry that has been targeted by HMRC
  • Your income levels are not consistent with your standard of living
  • HMRC receives a tip-off

HMRC could investigate your business in relation to its CIS, PAYE, VAT, Corporation tax or Self-Assessment Tax Returns.

Don’t Panic

Whilst HMRC may have found an inconsistency in your tax returns, or highlighted a risk area, there could be any number of legitimate reasons for this.

In most cases we find that providing HMRC with full answers to their questions, and sending them the necessary documents and evidence, will lead to them simply agreeing with your tax calculations and moving on.

What to do

  • Keep high quality accurate records
  • File returns on time
  • Pay your tax on time
  • Seek advice from TorrWaterfield

Contact TorrWaterfield – 0116 2423400

If you do receive a letter from HMRC, contact us straight away.  We can assist you throughout the entire tax investigation. 0116 2423400

We will:

  • Offer help and advice
  • Contact HMRC on your behalf, replying to their correspondence by post, email and telephone
  • Use our premises for meetings with HMRC
  • Appeal against HMRC’s decisions if necessary
  • Keep you updated throughout the whole process

Fee Protection

Many investigations are concluded after one letter, meeting or phone call.  But some can be on-going for months or years.

We encourage all of our clients to take out our fee protection.  ThStuart Caney April 2012is typically costs £190 per year.  We can then recover our cost from a third party, rather than charge you for our services. 

Stuart Caney, Accounts & Tax 

If like many of our clients you wish to benefit from this please contact Hollie Crown now for a personalised quote.

The benefits of becoming an apprentice

By deciding to do an apprenticeship the transition from school into the working world was made a lot easier. I still wanted to learn and get qualifications but I found this difficult to do in a classroom as the learning was not hands-on. By doing an apprenticeship I gained intimate knowledge of the work environment which I could not have done in a classroom.

With apprenticeships there are excellent progression opportunities with different levels you can do. With the support of a skills assessor you can easily work out the best course for you, which for me was a level 2 NVQ in Business & Administration. Because the work involved in completing the NVQ was based on my job role, it was easy to complete and I could take skills I learnt from my apprenticeship and use it in my job role. I’ve now progressed on to a level 3 NVQ which I am due to finish in the next couple of weeks.

I was also able to free up some of our existing staff’s time by helping with the work they may not have currently had time to do. As well as gaining extra experience by doing this, it is also extremely helpful for Torr Waterfield and my co-workers.

The benefits of hiring an apprentice

Hiring an apprentice can make the recruitment process easier and quicker for employers as training providers will help with pretty much the entire process such as filtering CV’s, finding and recruiting an apprentice, training and accessing funding.

The wage an apprentice earns is based on their age and the sector they work in which makes it far more cost effective than hiring older, skilled and qualified staff. The cost of training can also be fully government funded or contributed to, however this again depends on the age of the apprentice and the sector your business falls within.

For more information on becoming or hiring an apprentice you can visit https://www.gov.uk/topic/further-education-skills/apprenticeships or call us on 0116 2423400 

Amy Fisher

Administrator/Reception_DSC1514

How to tell HMRC about your company car.

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You’ll pay tax if you or your family use a company car privately, including for commuting.

You pay tax on the value to you of the company car, which depends on things like how much it would cost to buy and the type of fuel it uses.

This value of the car is reduced if:

  • you have it part-time
  • you pay something towards its cost
  • it has low CO2 emissions

If your employer pays for fuel you use for personal journeys, you’ll pay tax on this separately.

If you need to pay tax on your company car, you can use HMRC’s online service to:

  • check your company car’s details
  • tell HMRC about any changes to your car since 6 April
  • update your fuel benefit, if your employer pays for fuel

You’ll need:

  • the car’s list price (including VAT and accessories) – you can get this from the manufacturer or your employer
  • CO2 emissions information
  • your National Insurance number the first time you sign in

You can do this here. You will need a HMRC online user id and password

When you can’t use this service

You can’t use the company car tax service if:

  • you’re part of a car averaging or car sharing scheme
  • your employer is managing benefits and expenses through the company payroll (known as ‘payrolling’)

Contact HMRC or your employer to update your company car details if you can’t do it online.

Personal tax account

Signing in to the company car tax service activates your personal tax account. You can use this to check your HMRC records and manage your other details.

Check your tax code

Updating your company car details may change your tax code. Check or update this using your personal tax account.

If you would like any further information then please contacts us, 0116 2423400 or info@torrwaterfield.co.uk

Becky Edwards, Payroll Manager 

Construction Industry – Subcontractor verification changes from 6 April 2017

Construction Industry – subcontractor verification’s

HMRC have confirmed in the latest Employer Bulletin that changes will be made to the verification of subcontractors in the construction Industry Scheme (CIS) from 6 April 2017.

From 6 April 2017, contractors must use an approved method of electronic communication to verify their subcontractors. So from 6 April 2017 HMRC will no longer accept any telephone calls to verify subcontractors and from then contractors must verify subcontractors using:

  • the free HMRC CIS online service, or
  • commercial CIS software.

This change is one of a series made to CIS to increase HMRC efficiency and accuracy, and to reduce administration. HMRC are also reminding contractors that they have also introduced additional features of the online system including the ability to amend returns online, and the addition of an online message/alert service.

Please contact us for help with CIS issues. 0116 2423400

Are you a parent? What are your childcare choices?

In our Winter 2016 newsletter we led with an article about the new Tax-Free Childcare scheme that was expected to be launched in early 2017.

HM Revenue and Customs have today launched the Childcare Choices website which can be reached from the related article:

https://www.gov.uk/government/news/uk-families-will-soon-see-bills-cut-as-date-announced-for-the-launch-of-tax-free-childcare

The article also gives details of the availability of up to 30 hours of free childcare for 3 to 4 year olds from September this year.

We understand that parents can pre-register from Wednesday, with the new scheme launching at the end of April.

If you require any further information or advice then please contact us 0116 2423400 

Neil Fordintro-desktop-full

Spring Budget 2017

I am sure that you have seen the headlines in the papers this morning about the Budget and for a detailed analysis please see the report on our website:

www.torrwaterfield.co.uk/news/budget-report.

The items that have caught my attention and I think are relevant to most people are as follows:

National Insurance for the self-employed

At present, if self-employed, you pay class 2 National Insurance of £145.60 for a complete year, and class 4 at 9% based on your level of profits.  The Government do not think that this is fair as employees pay National Insurance at 12%.  To level this position, class 2 National Insurance will be abolished from 06/04/2018 and the class 4 element will increase to 10% from that date, and to 11% from 06/04/2019, thus bringing the self-employed more in line with the employed.

Dividend changes again …

From 06/04/2016 broadly the first £5,000 of dividend income is taxed at 0 % (Dividend Allowance).  This will continue until 05/04/2018.  However, from 06/04/2018 the Dividend Allowance will reduce to £2,000.  This will mainly affect the family company shareholder and increase their tax liability as follows:

Basic rate taxpayer – additional tax of £225

Higher rate taxpayer – additional tax of £975

Additional rate taxpayer – additional tax of £1,143

Individual Savings Accounts (ISAs)

 The overall limit is increasing from £15,240 to £20,000 on 06/04/2017.

Property and trading income allowances

Although this was mentioned last year it comes into play on 06/04/2017. It is as it says, so if you have property or trading income of £1,000 or less you will no longer need to declare this or pay tax on it.  This could cover small amounts of rent from Air ‘bnb’ activities or trading on ebay. 

New Childcare provisions

 If you are taking out new childcare provisions from 06/04/2017 then, instead of opting for a salary sacrifice scheme and receiving vouchers, for every 80 pence that you contribute the Government will contribute 20 pence. The maximum the Government will contribute will generally be £2,000.

Making Tax Digital

This will be introduced on 06/04/2018 for businesses, the self-employed and landlords who have profits chargeable to Income Tax and pay Class 4 National insurance Contributions where their turnover is in excess of the VAT Threshold, which will be £85,000 from 01/04/2017.

As this is a very new area please contact us for further information.

Salary Sacrifice

 From 06/04/2017 this is changing, but it is still beneficial for both the employer and employee to sacrifice salary in respect of employer provided pensions, childcare vouchers, workplace nurseries and cycle to work schemes. 

Construction Industry

The government are launching a consultation on 20 March 2017 to look at various areas, including the qualifying criteria for Gross Payment Status and options to combat VAT supply chain fraud in supplies of labour.

In addition to the above, certain other changes come into force on 06/04/2017 that have been mentioned in earlier Budgets namely:

Restrictions on residential property interest

Landlords will no longer be able to deduct all of their finance costs from their property income.

Inheritance Tax residence nil rate band

There will be an additional nil rate band for deaths on or after 06/04/2017 where an interest in a main residence passes to direct descendants.

As mentioned above I have only mentioned the areas that I believe will be most relevant to the majority of our clients but other areas can be found on our website.

Please contact us if you have a specific query. 0116 24243400

Julia Harrison, Tax ManagerJulia Harrison April 2012