Would your business benefit from monthly or quarterly management accounts?

Having quality management accounts can be beneficial to your business as they can help you to grow by making it more efficient and hopefully more profitable.

Management accounts are a set of detailed accounts prepared to illustrate the company’s   performance. The goals of the accounts are to provide key financial information which will help with short term financial decisions and in planning for long term development. 

The main advantage of having management accounts is being able to control the business. If you want to make projections, cash flows or be able to be accepted for finance, management accounts are an essential starting point. They will provide you with the up to date information throughout the year to give you accurate feedback of performance. If you find that your business is growing rapidly and want to be able to plan for the future, we recommend that you put in the controls and ways of reporting now to help guide the growth.

Typically, the accounts are prepared on a quarterly basis; it is not uncommon however to have monthly reports supplied to the business.

If you feel that additional guidance is needed as your business starts to grow, then please get in contact with us so we can help you make the right the decisions. Please visit our website for a complete list of our support services Click Here. 

Or contact us on 0116 2423400 or info@torrwaterfield.co.uk 

Eoghan Macilwraith, Accounts & Tax 

 

Autumn Budget – 29 October 2018

So, we already knew about some of the announcements before the chancellor, the Rt. Hon. Philip Hammond MP, spoke yesterday, so much so he even made a joke about toilets and leaks. As ever there was good news and bad news for taxpayers, a full summary is on our website but here are some good news/bad news highlights:

If you are a business…

Good news

  • Capital allowances – Annual Investment Allowance (AIA) increasing from £200,000 pa to £1million pa for 2 years from 1 January 2019
  • Capital allowances – a new Structures and Buildings Allowance (SBA) for non-residential buildings on eligible construction costs on or after 29 October 2018, this will enable business to claim 2% pa on cost
  • The corporation tax rate, as previously announced, will drop to 17% from 2020

Bad news

  • Capital allowances – the writing down allowance (WDA) on special rate pools, for things such as cars with CO2 emissions of over 130g/km, reducing from 8% to 6% pa
  • Capital allowances – discontinued 100% allowances for energy & water efficient equipment, although you will still be able to claim AIA’s
  • National Living Wage (previously National Minimum Wage) for over 25’s increasing from £7.83 per hour to £8.21 (which also has an effect on the auto-enrolment pension contribution cost)

And more bad news for larger companies

  • Digital Services Tax – for large digital companies (e.g. Amazon) – 2% on revenues linked to UK
  • Corporate capital loss restriction for large companies (from April 2020) – there is already a £5m cap on income losses, this is now extended to capital losses as well
  • Employment allowance restricted to businesses below £100,000 employers NIC
  • R&D tax credit (cashing in instead of reducing tax bill) capped at 3 times the PAYE & NIC liability
  • Off payroll working (IR35) currently in force for public companies will be introduced on private medium and large companies (although not until 2020) – PAYE and NIC will be deducted from the deemed employee and Employers National Insurance will be payable by the company.

If you are an Employee…

Good news

  • Personal allowance increasing from £11,850 to £12,500
  • Higher rate threshold increasing from £46,350 to £50,000 (these two increases will mean a basic rate tax payer will save £130 pa, a higher rate tax payer £860 pa and an additional rate taxpayer £600 pa)
  • National Living Wage for over 25’s increasing from £7.83 per hour to £8.21

Bad news

Other taxes…

Good news

  • Stamp Duty – First time buyers of a qualifying shared ownership in a property of £500,000 or less will get an exemption from SDLT and this is backdated to 22 November 2017 (i.e. you can claim a refund)
  • Stamp duty refunds – the time to make a claim for a refund on the 3% supplement on buying your new home before selling your old home, has been extended from 3 months to 12 months from the sale of your old home (although the filing deadline for SDLT returns is reduced to 14 days after the effective rate of transaction)
  • Capital Gains – annual exemption increased from £11,700 to £12,000 pa

Bad news

  • Rent a room relief – you will actually need to have shared the premises during part of the time you are claiming the relief, effectively excluding income from places like Airbnb
  • Entrepreneurs relief – to qualify, the minimum period is extended from 12 months to 24 months
  • Capital Gains – private residence relief final period exemption reduced from 18 months to 9 months
  • Capital Gains – lettings relief will only apply when the property is in shared ownership with a tenant, in reality this means very few people will qualify and therefore only get private residence relief on sale of their home, however this is subject to consultation and may well change

The above is only a brief summary of the proposed changes. For a more detailed breakdown please visit our website here.

If you have any questions about the budget, or how it will impact you or your business, please contact us on 0116 242 3400 and we will be happy to help.

Denise Burley

Have you taken advantage of the Marriage Allowance?

A married couple or civil partnership can apply to transfer 10% of the income tax personal allowance from one to the other. Although called the marriage ‘allowance’, it is a transfer rather than an additional allowance.

To qualify for the allowance, neither of the partners can be higher rate taxpayers and cannot be claiming the married couple’s allowance. To benefit as a couple, one person should be earning below the personal allowance (£11,850 for 2018/19).

The maximum tax saving in 2018/19 is £237.00 (10% of the £11,850 personal allowance at 20%).

 

How to apply

 The application for the transfer is made by the person who wants to transfer part of their allowance to their partner. It is absolutely fundamental that the recipient of the allowance does not make the claim.

If your income is predictable, you can apply during the tax year here. If you apply during the tax year, the claim is in place until withdrawn or through either death or divorce.

If your income is unpredictable, because you are self-employed for example, you can make an application after the tax year on your Self-Assessment Tax Return. This claim must be done each year – it does not remain in place for future years.

 

Backdated claims

 Currently, you can backdate marriage allowance claims to include any tax year since 5 April 2015 if you were eligible. This means you could claim back as much as £662 if you can claim for 15/16, 16/17 and the 17/18 tax year.

 The Married couple’s allowance

 If either you or your partner were born before 6 April 1935 you may benefit more from the Married Couple’s Allowance instead, which you can read more about here.

For further information or help on the above, please call the office on 0116 242 3400 or email us at info@torrwaterfield.co.uk

Aiden Hyett, Accounts & Tax 

Is your child about to collect their GCSES? – You need to tell the Tax Man

(A-levels, further education or an approved training course, you MUST tell the taxman if you’re claiming child benefit or risk losing out on thousands of pounds a year)

June was a busy period for students throughout the UK as they completed their GCSE and A-Level exams, but what happens to your child benefits afterwards?

Your Child Benefit stops on 31 August on or after your child’s 16th birthday if they leave education or training. It continues if they stay in approved education or training, but you must tell the Child Benefit Office.

You’ll be sent a letter in your child’s last year at school asking you to confirm their plans.

You must report any change of circumstances to the Child Benefit Office.

‘What If my child continues education or training?’

Use the online service to tell the Child Benefit Office that your child is staying in approved education or training after age 16.

Approved education:

Education must be full-time (more than an average of 12 hours a week supervised study or course-related work experience) and can include:

  • A levels or similar – eg Pre-U, International Baccalaureate
  • Scottish Highers
  • NVQs and other vocational qualifications up to level 3
  • home education – if started before your child turned 16
  • traineeships in England

Courses are not approved if paid for by an employer or ‘advanced’, eg a university degree or BTEC Higher National Certificate.

Approved training should be unpaid and can include:

  • Foundation Apprenticeships or Traineeships in Wales
  • Employability Fund programmes or Get Ready for Work (if started before 1 April 2013) in Scotland
  • United Youth Pilot, Training for Success, Pathways to Success or Collaboration and Innovation Programme in Northern Ireland

Courses that are part of a job contract are not approved.

‘What if my child decides to leave education or training?’

Use the online service (CH459) to tell the Child Benefit Office that your child aged 16 or over has left approved education or training.

When your child leaves approved education or training, payments will stop at the end of February, 31 May, 31 August or 30 November (whichever comes first).

 Temporary breaks

 If there has been a break in your child’s education or training (for example if they change college), you might get Child Benefit during the break. In this case you should tell the Child Benefit Office.

 Apply for an extension

You could get Child Benefit for 20 weeks (called an ‘extension’) if your child leaves approved education or training and either:

  • registers with their local careers service, Connexions (or a similar organisation in Northern Ireland, the EU, Norway, Iceland or Liechtenstein)
  • signed up to join the armed forces

To qualify for this, your child must:

  • be 16 or 17
  • work less than 24 hours a week
  • not get certain benefits (eg Income Support)

You must have been entitled to Child Benefit immediately before they left the approved education or training and apply for it within 3 months of them leaving.

Apply for the extension online

If you have any queries regarding this information please feel free to contact a member of TorrWaterfield on 0116 242 3400

Sam Koelling, Accountant

P11d returns – Recap on the general principles of what is allowable.

BUSINESS TRAVEL

As we approach the time when employers have to deal with P11d returns, it is worth having a recap on the general principles of what is allowable.

Travel expenses have specific tests which must be satisfied in order for an employee to gain a deduction. These rules are different from the general rule for deductibility of expenses in that they do not need to be incurred “wholly and exclusively”. This is because with any business travel there are likely to be elements of mixed or private purpose, e.g. meals on trips or overnight accommodation. Meals and overnight accommodation come under the heading of “subsistence” and these follow the rules on business travel.

In order for travel expense to be allowable, it must satisfy one of two tests. Either

  • It is ‘necessarily incurred in the performance of duties’ or
  • The travel is ‘for necessary attendance’

Allowable business travel expenses include the actual costs of travel, the subsistence expenditure and other associated costs that are incurred as part of the cost of making the journey. They consist of expenses you are obliged to incur in performing your duties. Tax relief is not normally available on travel costs relating to commuting to and from the normal place of work, or private travel. There are some special rules on Worksite Travel Costs however, where exceptions occur that should be considered.

Road Travel – Use of Private Vehicles

You may claim a cost per mile for allowable business journeys in your own vehicle.  There is a distinction between the first 10,000 miles in any tax year and subsequent miles. The 2018 allowable mileage rates that may be claimed are as follows:

Type of Vehicle Motorcar Motorcycle – all Cycle
First 10000 Miles 45p per mile 24p per mile 20p per mile
10000+ Miles 25p per mile 24p per mile 20p per mile
       

You must retain valid VAT fuel receipts to support your claim. There is currently no HMRC requirement to state the fuel type.

Road Travel – Use of a Hire Car

Occasionally you may need to hire a car, either for a specific journey or if your own car is being serviced or repaired. If you regularly use your personal car for business travel and claim mileage rates you cannot claim the cost of the hire car, you should continue to claim the authorised mileage rates.

If you don’t use your personal car for business and you hire a car in your own name for business journeys for short term use, the hire costs and fuel are an allowable expense. If the hire car is used for personal use a proportion of the hire costs will be disallowable.

Hiring a car abroad specifically for business purposes is an allowable expense and the hire costs and fuel can be claimed.

Rail or Air Travel

The cost of train or airfares for business-related journeys is allowable. Additional costs such as excess baggage claims are also allowable if they are incurred in the performance of your duties and have no personal element.

Other Allowable Travel Costs

Allowable travel costs include bridge, tunnel and road tolls, bus and taxi fares, car-parking charges and congestion charges provided they have been incurred on a business trip.

Overseas Travel Costs

The cost of overseas travel is allowable where you are obliged to incur the expense in the performance of your duties.

Accommodation

The cost of hotel accommodation for nights spent away from home on business may be claimed. The cost of maintaining a rental property may also be allowable provided that use of the property is necessary for business purposes, and a permanent residence is being maintained elsewhere within the UK where a regular pattern of commuting back to that residence is evident. Where a rental property is not used exclusively for business purposes the proportion of costs relating to the period of private usage is not allowable. In such cases it will be necessary to determine the appropriate split of private and business usage and claim only for the business use.

The cost of accommodation in relation to site work is allowable if the period of time at the site is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.

Incidental Overnight Expenses Allowance

On a business trip you may incur personal costs such as private telephone calls, laundry, newspapers or the cost of childcare. HMRC regards these as personal rather than business expenditure and are not allowable. However, if you are staying overnight while either away on business or on allowable work-related training, you are entitled to claim a subsistence allowance.

There are two Incidental Overnight Expenses Allowance rates: £5 per night in the UK and £10 per night overseas (including Eire). No receipts need to be produced. These allowances can only be claimed in relation to an overnight stay, for example, on a business trip in the UK lasting 5 days with 4 overnight stays, £20 can be claimed.

Incidental Overnight Expenses Allowances in relation to site work are claimable if the overnight stay is associated with a period of time at a site that is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract, and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.

Meals

When staying overnight meals are an allowable expense. Food and drink must have been purchased after the journey commenced. As a result of this rule costs incurred in preparing a pre-packed lunch are not allowable expenses. The levels of costs that are generally acceptable to HMRC are as follows and claims need to be supported with a valid receipt:

  • Breakfast or lunch: £15 in London and £10 outside London
  • Dinner: £40 in London and £30 outside London

HMRC accepts that reasonable costs of alcoholic beverages with a meal may be claimed. Where you have dined with work associates, only the proportion of the total cost that pertains to you as the director is allowable unless the purpose of the meal is business entertaining. Appropriate identification and explanation of the receipts must be provided in English when submitted in relation to meals overseas.

If you would like to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

Nish Bathia, Director 

P11Ds – Return of Expenses and Benefits

It is that time of year again when your organisation’s P11D forms will need to be prepared and submitted to the Inland Revenue. The most common entries being the car or van benefit, with or without fuel for private use.

In addition to the above, directors/employees are sometimes provided with private health insurance.  The best way of dealing with this is to ensure that the contract is between the employer and the insurance company and therefore the amount is treated as a benefit in kind and reported on a P11D 

However, sometimes the employer will offer to pay the employee’s personal medical insurance directly.  In this case the contract for the health insurance will be between the insurance company and the director/employee and the payment is treated very differently to the above.  If the company pays the bill on behalf of the employee the amount is entered onto the P11D for tax purposes but is dealt with through the payroll for National Insurance.  This, as you can imagine, gets very messy.

This does not just apply to medical insurance but also any contract in the director/employee’s name that the employer settles on behalf of the director/employee.  Another common one that springs to mind is a mobile phone bill. 

The moral of the above is to set up medical insurance/mobile phone contracts between the employer and the supplier directly which simplifies the treatment of dealing with the whole reporting process.

The above is just a small part of the P11D system so please get in touch if you require any help. 0116 24243400 or info@torrwaterfield.co.uk

Julia Harrison , Tax Manager 

Why has my tax code changed?

“How do I know if my tax code is correct?”

Your tax code is used by your employer to calculate how much tax needs to be deducted from your pay. HMRC tells your employer which code to use to collect the right amount of tax from you. You can check your income tax online to see what your tax code is, how your tax code has been worked out and how much tax you have paid and are likely to pay in the coming months.

“What does my tax code actually mean?”

Your tax code represents how much tax free income you have for that tax year, for example the standard tax code for the 2018/19 tax year is 1185L and this means you have a tax free income of £11,850.

“What does the letter in my tax code mean?”

The letter in your tax code represents your situation and how that affects your tax free income, for example:

  • L = You’re entitled to the standard tax free allowance.
  • M & N = Marriage Allowance, this means you have either transferred or received personal allowance to or from your partner.
  • 0T = Your personal allowance has been used up or you’ve started a new job and your employer doesn’t have all of your starter details.

To see the full list on the HMRC website please click here.

“Why is there a W1/M1 at the end of my tax code?”

The W1/M1 means that the tax code is non-cumulative; in these cases tax will be calculated purely based on the taxable pay for that pay period. Each pay day is treated as if it is the first week or month of the tax year. All previous pay and tax are ignored.

There are a few reasons you may have been put on this type of code, for example:

  • Started a new job
  • Getting Company benefits or state pension
  • Becoming employed after being self employed

These tax codes are generally temporary and you or your employer can update this.

“How do I change my tax code?”

 You can use the HMRC online services to tell HMRC about any missing or incorrect information. They will then update this by sending you and your employer a P6 tax coding notice. If you can’t use the online services you can call HMRC on 0300 200 3300 and they will help guide you through and get your tax code updated.

If you would like to discuss this further then please get in touch on 0116 242 3400.

Polly Dennis, Payroll Assistant 

The following Tax Events are due on 19th April 2018.

The following Tax Events are due on 19th April 2018:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th January 2018 to 5th April 2018.

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.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

PAYE, Student loan and CIS deductions are due for the month to 5th April 2018.

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.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

Automatic interest is charged where PAYE tax, Student loan deductions, Class 1 NI or CIS deductions for 2017/18 are not paid by today. Penalties may also apply if any payments have been made late throughout the tax year.

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.

Deadline for employers’ final PAYE return to be submitted online for 2017/18.

This deadline is relevant to employers.

This is the last day by which your final Full Payment Summary (FPS) for the 2017/18 tax year should be sent to HMRC.

You will not be able to file an FPS relating to 2017/18 after 19th April. If you need to make an amendment or correction to the details reported on a 2017/18 FPS you will need to submit an Earlier Year Update (EYU).

Please be aware that if we deal with the payroll on your behalf that we will ensure that this matter is dealt with on a timely basis.

If you would like to discuss this any further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

We send monthly reminders about all upcoming tax deadlines and other important business related deadlines. If you would like to receive these email notifications please register here https://www.torrwaterfield.co.uk/registration/register 

 

 

How do you complete a Monthly CIS Return?

What is CIS?

The Construction Industry Scheme is a method of deducting tax from subcontractors in the building sector. Contractors deduct a percentage of the money owed on their payments to subcontractors and pass it over directly to HMRC. The amounts are effectively taxed at source as the sub-contractor does not get the money.  The deducted CIS tax counts as advance payments towards the tax and National Insurance contributions that will be calculated upon completion of the subcontractor’s self-assessment tax return.

What do I need to complete a return?

Monthly CIS returns need to be submitted by the contractor to HMRC to disclose the amount of CIS which has been deducted and is therefore due to be paid over to HMRC.

The contractor needs from the subcontractor an invoice which states the money they are owed.

The invoice should split out the materials and labour with CIS only being deductible on the labour element of the invoice. CIS is deducted at 20% providing the subcontractor has a UTR (unique tax reference) number which should be displayed on the invoice. If there is no UTR number then CIS will be deducted at 30%.

How do I do it?

CIS periods run from the 6th of the month to the 5th of the month following – for example, 6th March – 5th April. The CIS return then needs to be submitted and the liability paid over within two weeks of the period end – 19th April for example in order to avoid facing late filing charges. The return can be manually entered under the contractor’s logon on the HMRC website or it can be submitted via numerous accounting software programmes. The CIS is payable to HMRC upon payment of the invoice and not the date the invoice is issued, so it should only be included on the CIS return at this point. Once the return has been submitted to HMRC, statements should be sent out to all subcontractors for their own records.

If you wish to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Brook Lucas, Accounts & Tax 

Spring Statement 2018

The Chancellor Philip Hammond presented his Spring Statement on Tuesday 13 March 2018.

In his speech he provided an update on the economy and responded to the Office for Budget Responsibility forecasts. In addition he launched consultations on various aspects of the tax system.

Changes to the timing of tax legislation

Chancellor Philip Hammond has implemented some fundamental changes to the UK fiscal timetable.

In the 2016 Autumn Statement, the Chancellor announced that he would be introducing a new Budget timetable, which would see the main annual Budget moving from its traditional spring setting to the autumn and the Autumn Statement being replaced by a Spring Statement. The first Autumn Budget was presented in November 2017.

The new process

While the general process of developing tax policy will remain the same, the timescales for policy making and consultation have changed significantly. The government hopes that the new system will allow more time to scrutinise and consult on draft tax legislation before it is introduced.

The new timing of the Autumn Budget will allow the announcement of most new measures well in advance of the tax year in which they are due to take effect. The Spring Statement also offers the opportunity for the government to consult during the early stages of policy making, and publish calls for evidence on long-term tax policy issues.

Under the new system, measures announced in the Autumn Budget will generally be consulted on during the winter and spring, with draft legislation being published in the summer, ahead of the introduction of the Finance Bill in the winter. This will then receive Royal Assent the following spring.

Click here to read our summary of the Spring Statement 2018

If you would like to discuss any of this further then please get in touch 0116 2423400