Autumn Budget 2017

Yesterday saw a budget that focused, as expected, on housing and a stormy economic forecast. Our full summary is available on our website, but the key tax developments are summarised below.

Personal Tax Rates and Allowances

The personal allowance is currently £11,500 and will increase to £11,850 in April 2018. The higher rate threshold similarly increases from £45,000 to £46,350. Phillip Hammond reaffirmed his commitment to raise these thresholds to £12,500 and £50,000 respectively by 2020.

 National Insurance for the self-employed

 After the embarrassment of Mr Hammond’s U-turn earlier this year after attempting to abolish Class 2 National Insurance and increase Class 4, it was announced that in order to give sufficient time for a more popular proposal to be devised, there will be a delay of one year before any reform.

Capital Gains Tax

 After unfavourable consultation, the proposal for a 30-day window between Capital Gains arising and the tax being due has been deferred until April 2020.

 Research and Development

 Large companies claiming relief for research and development under the RDEC scheme will see their credit increase from 11% to 12% as part of plans to help the economy grow after Brexit.

Corporation Tax

Indexation Allowance – a long standing relief for companies making capital gains will be frozen from 01 January 2018. This allowance protected companies from gains that arise as a result of inflation and as a result no relief will be available for inflation accruing after this date. This move is perhaps unsurprising, with property investors more often operating through a limited company as a result of this allowance and the increased taxation of landlords in recent budgets.

 Stamp Duty

 With the youth vote rocketing in the last election, the government has decided to act further on the concerns that first time buyers are struggling to get on to the property ladder. Stamp duty will be abolished immediately for first time buyers purchasing properties worth up to £300,000. Those buying their first houses in expensive areas such as London will pay no stamp duty on the first £300,000 of properties costing up to £500,000.

 Value Added Tax (VAT)

 The VAT registration threshold will remain at £85,000 p/a for two years from April 2018. This will come as a relief for many, as some predicted this could be lowered to nearer the EU average of £25,000.

Making Tax Digital (MTD)

 As announced in July, no business will be mandated to use MTD until April 2019, and then only for VAT obligations. The scope of MTD will not be widened until April 2020 at the earliest.

The above are only the areas that I feel will be relevant to the majority of our clients, other areas and greater detail can be found on our website, click here. 

Please contact us on 0116 242 3400 if you have a specific query.

Matt Smith.

HMRC’s Worldwide Disclosure Facility (WDF)

This is a facility that the Inland Revenue introduced in 2016 which allows the voluntary disclosure of any UK tax liabilities that relate to offshore income or assets, which have not previously been disclosed to the UK tax authorities, to be declared.

This includes:

  • Income arising from a source outside the UK
  • Assets situated or held outside the UK
  • Activities carried on wholly or mainly outside the UK
  • Where the funds connected to unpaid tax are transferred outside the UK

Which years?

  • The facility applies to all tax years up to and including 2015 to 2016.
  • If HMRC has sent you a tax return for that year, or any tax year from 2013 to 2014 which is still outstanding, you must complete the return and you must not include these tax years on this disclosure form.

 

By contacting the Inland Revenue, rather than the Inland Revenue contacting you, the penalty regime will be less harsh.

 

If you think that the above applies to you then please get in touch with us as soon as possible so that the Inland Revenue can be notified. 0116 2423400

Julia Harrison, Tax Manager 

Hot Topic Making Tax Digital for Business

The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.

Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:

  • keep their records digitally (for VAT purposes only) and
  • provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software.

It has also been confirmed that MTD will be available on a voluntary basis to other businesses, for both VAT and income tax.

Exemptions will be available where HMRC are satisfied the business is run by a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications, some insolvent businesses; or where HMRC are satisfied that it is not reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason.

The proposed rules include provisions that where a business is in scope for MTD the business must use functional compatible software to meet the new requirements. This software will either be a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:

  • keeping records in a specified digital form
  • preserving digital records in a specified digital form
  • creating a VAT return from the digital records and providing HMRC with this information digitally
  • providing HMRC with VAT data on a voluntary basis and
  • receiving information from HMRC via the API platform that the business has complied.

Businesses will need to preserve digital records in the software for up to six years. The digital records include:

  • ‘designatory data’ including the business name, principal place of business and VAT registration number together with information about which VAT accounting schemes they use
  • the VAT account that each VAT registered business must keep, by law, and
  • information about supplies made and received.

Further information on the required information can be found in Annex 1.

The government will make the final detailed requirements available to the software providers by April 2018 to allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.

VAT returns

Businesses within the scope of MTD for VAT will be required to submit their VAT returns using their functional compatible software.

The information contained with the VAT return will be generated by pulling information from the digital records. This information will contain as a minimum the 9 boxes required for the completion of the VAT return but can also contain a specific data set of supplementary information, all of which will be pulled from the digital records.

Businesses submitting monthly or non-standard period returns will be able to continue to do so. The VAT annual accounting scheme will also be retained with the current conditions. Businesses making these types of returns will also be required to keep digital records and submit their VAT returns through software.

Under the new rules some businesses may choose to voluntarily provide further information:

Periodic updates
Businesses will be able to submit VAT information more frequently than their VAT return obligations require on a voluntary basis as a ‘voluntary update’.
Supplementary data
HMRC believes that businesses and HMRC could benefit from the submission of supplementary data detailing how the figures in the return are arrived at. HMRC believe this additional data will help them target non compliance. The software will allow for the voluntary submission of supplementary VAT data as part of a VAT return or a voluntary update. This will allow HMRC to test with businesses the extent to which they and HMRC can benefit from such supplementary data.

Timescale

VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.

We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements. Please contact us for more information 0116 2423400

What is the VAT cash accounting scheme?

What is the VAT cash accounting scheme?

The VAT cash accounting scheme is a useful tool for many small businesses, as you only pay the VAT on your sales to HMRC once you have received payment yourself.

However, you may only reclaim VAT on your purchases from HMRC when payment of the invoice has been made.

You can join the cash accounting scheme if your turnover is less than £1.35m, and can continue to use the scheme until your turnover reaches more than £1.6m.

Your business should be eligible to use the scheme if you meet the threshold requirement, unless your VAT affairs are not up-to-date, you have been convicted of a VAT offence or have been penalised for evading VAT over the past 12 months.

What is the advantage of using cash accounting?

Clearly the main benefit of joining this VAT scheme is in the cash flow benefits it provides. If you have a late paying client for example, you will not have to account for the VAT on any outstanding sales invoices until you have been paid. In fact, if you incur any bad debts, the VAT will never need to be paid to HMRC.

What is the disadvantage of using cash accounting?

There may be some disadvantages, depending on your situation.  For example, as you cannot reclaim the VAT on any purchases you make until payment is made, this could cause cashflow problems if you buy a substantial amount of stock on credit.

Joining the cash accounting scheme

You do not need to inform HMRC if you want to join the scheme. However, you must start at the beginning of a new VAT quarter.

You can also leave the scheme at the end of any VAT quarter, if necessary, or if your taxable turnover reaches the £1.6m mark.

If you would like any assistance on joining, leaving or any further information on the cash accounting scheme, then feel free to contact  the office on 0116 242 3400.

Tom Luckett,  Accounts & Tax 

Tax Event Due 31st October 2017

The following Tax Events are due on 31st October 2017:

Personal Tax Events

Deadline for submission of 2016/17 self assessment returns if you require HMRC to compute your tax liability and/or if tax underpaid is to be collected by adjustment to your 2018/19 PAYE code.

This deadline is only relevant for those individuals who complete a ‘paper’ self assessment tax return and who are employees. Where you have an underpayment you may request that HMRC collect the tax outstanding by making an adjustment to your tax code for the year 2018/19.

Please note that where your return is submitted online then the filing deadline for ‘coding out’ is 30 December 2017.

If we are already dealing with this matter on your behalf you need take no action.

Deadline for submitting ‘paper’ 2016/17 self assessment returns.

This deadline is relevant to individuals who need to complete a self assessment tax return for 2016/17 and wish to file the return in a ‘paper’ form. Self assessment returns submitted after this date must be submitted electronically.

Please note that this deadline is not relevant if we are going to submit an online return for you or you are going to deal with the completion of an online return yourself. The deadline for submission of online returns is 31 January 2018.

If we are already dealing with this matter on your behalf you need take no action.

If you would like to discuss any of this further or require some help please contact us 0116 2423400 or email info@torrwaterfield.co.uk

Thinking of an Upgrade?

If the seemingly endless adverts are to be believed then if you subscribe to online bookkeeping software such as QuickBooks or Xero then your bookkeeping will become effortless, will probably be done in a coffee shop or on the go and will leave your accountant kissing an iPad with glee.

Whilst new software isn’t going to change your life, there is a lot to be said for having access to your records from any laptop/tablet/phone and from anywhere with a decent internet connection.

Online bookkeeping software allows you to send invoices and quotes to potential customers from your phone, enter purchase invoices from the sofa and even have bank transactions feed directly from your bank into the software to reduce the time taken to reconcile your bank.

The software can often be used by multiple users simultaneously, are compatible with Windows, Apple & Android operating systems and have a range of add-ons to allow data to be linked with third party software such as GoCardless or iZettle.

Cloud based software is constantly backed-up and saved by the software provider, and you can grant us direct access so there is no more need for taking and sending over backups. The software is constantly updated too so there’s no need to upgrade every few years.

If you’d like to discuss the packages available for your bookkeeping needs, or if you’re a Sage user and looking to upgrade to one of their subscription based products, please contact us and we can find the best option for you – we might even be able to obtain a lower subscription cost compared to going direct.

 

Matt Smith, Accounts Audit & Tax  

0116 24243400

Tax Calendar

The following Tax Events are due on 19th July 2017:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th April 2017 to 5th July 2017.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

PAYE Student loan and CIS deductions due for the month to 5th July 2017.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

Class 1A NIC due for 2016/17.

This deadline is relevant for employers who have provided their employees with benefits for 2016/17. These benefits should have been reported by the 6th July and the amount of the Class 1A employer only NI liability due calculated on the form P11D(b).

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. Interest will be charged if payment is made late. Penalties may also apply. 

We have a Tax Calendar on our website so you never miss a deadline to see future deadlines please visit our calendar  https://www.torrwaterfield.co.uk/resources/tax-calendar 

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

Help When You Need It

Help When You Need It

For the times when you need a second opinion, simply don’t know the answer, or it’s outside of your business remit, you can contact our dedicated Employment Law, Health & Safety and Commercial Legal Advice lines.

Because we have partnered with Croner Taxwise you’ll receive access to the UK’s leading Employment Law firm, free of charge.

Croner Taxwise specialists will offer you advice on all Employment Law related issues, acting as an external HR team for you.

Employment Law Advice Line

The specialist team will provide you with commercially sound advice on matters relating to looking after your employees and their welfare.

From managing absenteeism to calculating holiday entitlements, the Employment Law team is here to help.

Health & Safety Advice Line

The key with Health & Safety in the workplace is to proactively manage your obligations and not, as many do, wait until something happens.

The dedicated Commercial Health and Safety experts are only a phone call away. They are ready to answer any questions you may have and help you understand your safety obligations.

Commercial Legal Advice Line

Their Legal Consultants are, as you would expect, highly experienced solicitors who you can call to advise you on issues ranging from landlord and tenant litigation to ascertaining if an issue worth pursuing on formal legal representation or not.

Access to all of these advice lines is FREE to all our Fee Protection clients. Call us today to find out more 0116 2423400