What if there is a hard Brexit?

Although we strive to be non-political in this blog, it would seem that there is an increasing likelihood that when we leave the EU March next year the present free movement of goods will no longer apply. And so, putting aside our reaction to this possibility, what should we be doing to prepare for this so-called “Hard Brexit”?

Do you rely on EU Suppliers?

A fair proportion of the raw materials used in our manufacturing processes and the food we eat come from EU suppliers. It is unrealistic to expect UK businesses to increase stocks in anticipation of disrupted supply lines and increased prices after a hard Brexit. In the case of perishable foodstuffs this is patently impossible. Perhaps we could lobby EU suppliers of manufacturing and finished goods to set up warehousing facilities in the UK, otherwise we may be forced to seek suppliers from outside the EU.

Paying VAT at Source

With a hard Brexit it’s unlikely there will be a harmonisation of VAT for cross-border transactions and businesses that buy goods from the EU will be faced with paying the VAT when they purchase the goods. Eventually, the VAT can be reclaimed back in the normal way but there will be an initial cash flow hit as goods are paid for (including VAT) before the input VAT is reclaimed on a quarterly VAT return. HMRC may help with this issue by introducing a self-accounting for import VAT scheme similar to the present scheme for imports from EU countries. Businesses affected would be advised to at least quantify the likely cash flow downside and if significant, plan for additional funding to cover the deficit.

Retailers will have a tough time if they buy perishable goods from the EU. Without frictionless passage of goods across the Channel, delays could cause all sorts of issues. If warehousing in the UK is not possible, it is difficult to see how we could maintain our supplies and keep the larger supermarkets stocked.

Business Planning for a Hard Brexit

We have less than nine months to prepare, and wherever your business sits in relation to trading with the EU you should by now be making contingency plans to cope with the likely Brexit effects. We are certainly working with and supporting our clients in this way. If you would like to discuss this topic or need further help with any business or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413.

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Tax security deposits to be extended

Continuing the theme from last week’s blog post, we have listed details of a forthcoming change to the taxation of companies that were disclosed in the draft clauses published last week for the forthcoming budget. The change outlined expands the rights of HMRC to demand a security deposit from “at risk” tax payers.

In their draft notes HMRC say:

“HMRC can require some businesses to provide a security, in the form of cash or a performance bond, where this is considered necessary to protect the revenue. Securities may be required where a taxpayer has a poor compliance record and in “phoenix” type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts.”

HMRC already has powers to require security in relation to some areas of business tax, including VAT and PAYE. However, there is no similar provision in respect of corporation tax liabilities or deductions made by contractors on account of their subcontractors’ income tax under the construction industry scheme. The government intends to extend the existing securities regime to these areas to address these gaps in the coverage of the regime and strengthen HMRC’s ability to deal effectively with potential defaulters

Security deposits are normally requested when a company is liquidated owing monies to HMRC, and the directors then re-establish the trade in a new company, perhaps using assets purchased from the old firm’s liquidator – a so-called “phoenix arrangement”.

From Newco’s point of view, being required to lodge a hefty deposit with HMRC could be terminal if funding is not available. However, recent First Tier Tribunal cases have supported appeals from taxpayers when they can demonstrate that the owners of Newco were not directly responsible for any mis-management of Oldco. If you receive a request for a security deposit an appeal may be appropriate.

Negotiating with the HRMC

Often when it comes to smaller businesses we find the HRMC prefer to deal with the businesses appointed accountant, so do keep your accountant in the loop with any HMRC correspondence they may not be aware of so they can use their influence.  Don’t forget you can always discuss this with Bourne Accountancy, contact us via email at bourne@bournetax.com or call us on 0800 680 0413.

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Do not fall for spoof emails from the taxman

New figures show that HM Revenue and Customs (HMRC) requested a record 20,750 malicious sites to be taken down in the past 12 months, an increase of 29% on the previous year.

Despite a record number of malicious sites being removed, HMRC is warning the public to stay alert as millions of taxpayers remain at risk of losing substantial amounts of money to online crooks. The warning comes as Scam Awareness month, run by Citizens Advice, draws to a close.

HMRC has brought in cutting edge technology to tackle cyber-crime and target fraudsters. However, the public needs to be aware and report phishing attempts to truly defeat the criminals.

Genuine organisations like banks and HMRC will never contact people out of the blue to ask for their PIN, password or bank details.

Accordingly, people should never give out private information, download attachments, or click on links in emails and messages they weren’t expecting.

The most common type of scam is the ‘tax refund’ email and SMS. HMRC has confirmed that it does not offer tax refunds by text message or by email.  The government have published a new article on this which you can read via the following link: https://www.gov.uk/government/news/hmrc-warns-on-tax-refund-scams

HMRC has also been trialling new technology which identifies phishing texts with ‘tags’ that suggest they are from HMRC and stops them from being delivered. Since the pilot began in April 2017, there has been a 90% reduction in people reporting spoof HMRC-related texts. This innovative approach netted the cyber security team with the Cyber Resilience Innovation of the Year Award in the Digital Leaders (DL100) Awards.

In November 2016, the department implemented a verification system, called DMARC, which allows emails to be verified to ensure they come from a genuine source. The system has successfully stopped half a billion phishing emails reaching customers. This initiative has saved the public more than £2.4 million by tackling fraudsters that trick the public into using premium rate phone numbers for services that HMRC provide for free. Scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs.

HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and taken them out of the hands of cheats. HMRC is working with the National Cyber Security Centre to further this work and extend the benefits beyond HMRC customers.

Avoiding Spoof Emails that claim to be from the Government

Readers of this post who are concerned by any emails or text they have received should contact HMRC by phone to check and see that they are genuine. If your unsure how to spot illegitamte emails and would like to discuss the matter further please please contact us via email at bourne@bournetax.com or call us on 0800 680 0413.

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Advance notice

Last week the Treasury issued draft clauses for the forthcoming Finance Bill (to be published after the Autumn Budget later this year). These will set the scene for tax matters 2019-20 and beyond.

The aim of the advance notice is to give interested parties a chance to comment on the contents before government starts the formal process of processing the legislation through Parliament.

The draft clauses include numerous technical changes to legislation that are outside the scope of this article, but a cross-section of the more “interesting” disclosures are set out below:

  • Technical changes to various benefit arrangements for cars and vans.
  • Exemption from benefit charges if employees provide free vehicle-battery charging facilities for employees at work.
  • HMRC are to remove requirement for employers to check receipts for subsistence claims by employees using approved HMRC rates.
  • Employees will be able to nominate beneficiaries outside their close family members to receive their death in service benefits.
  • Non-UK resident property businesses will be subject to UK corporation tax and not income tax as at present.
  • The rent-a-room relief is to be amended to include a non-exclusive residence clause. This will mean that to continue to qualify for the £7,500 tax-free allowance, persons letting a room in their home will have to be in residence when they let.

Bear in mind that these are suggested clauses and are subject to change before the formal Finance Bill is published later this year.

Bourne Accountancy – More than just an Accountant

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we can be contacted via email at bourne@bournetax.com or call us on 0800 680 0413.

We also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Self-employed tax bills

Whether you pay Income Tax or National Insurance, the effect on your cash flow is the same. The payments are a necessary part of our obligation to fund the activities of the State, but the self-employed are often surprised that their bi-annual tax payments cover both “taxes” – NIC and income tax.

The weekly NIC Class 2 contribution is included, presently £2.95 per week, also Class 4 contributions: these amount to 9% of taxable income in excess of £8,424 and up to £46,350, and 2% on earnings above £46,350.

Accordingly, the combined rate of State dues on self-employed earnings in excess of £8,424 is potentially 29% – 20% basic income plus 9% Class 4 NIC – and over £46,350 a combined rate of 42%. Although in practice some of the income over £8,424 may be covered by other personal tax allowances, these combined rates illustrate the true impact of income tax and National Insurance to be paid.

Self-employed traders with significant taxable earnings should therefore expect to pay more than the usual rates of income tax when they contemplate settlement of their annual self-assessment bill and have funds in reserve to meet these combined liabilities.

Help Understanding Self Employment Taxes

If your self employed and need help understanding which taxes are applicable to your situation and when they are due then contact Bourne Accountancy for assistance, you can send us an email at bourne@bournetax.com or call us on 0800 680 0413.

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Director minimum salary levels 2018-19

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce National Insurance Contributions (NIC), and in some cases income tax.

The planning strategy is to pay a salary at a level that qualifies the director for state benefits, including the state pension, but does not involve payment of any NIC contributions.

For 2018/19 the NIC rate is set at 0% for annual earnings in the range of £6,032 to £8,424 inclusive. Earnings in this band range qualify for NIC credit for state benefit purposes. At up to £116 per week (£6,032 p.a.) no NIC credit is obtained for state benefit purposes. At over £162.01 per week (£8,424 p.a.) employees’ NIC starts to be paid at the rate of 12%.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band that depends on the actual date appointed. Care needs to be taken in these circumstances not to incur an unexpected liability to pay NIC.

Directors resigning during the year still have the full annual earnings band quoted above, and so care is needed to ensure that earnings for the whole tax year are within the range of £6,032 to £8,424.

Careful planning is also required to ensure that any impact of the National Living Wage regulations is considered, this may be particularly important for women who would like to claim statutory maternity benefit at some future date.

Optimising Director Pay

Directors considering their planning options for the first time are advised to take professional advice when setting the most tax/NIC efficient salary. Bourne Accountancy run a payroll bureau and are able to advise you on efficient salary levels and related matters, simply get in touch via email at bourne@bournetax.com or call us on 0800 680 0413.

Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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What now for the gig economy

The Supreme Court has ruled in favour of Gary Smith, a self-employed contractor with Pimlico Plumbers, who considered he was due worker’s rights and has now had his assertion rubber stamped by the highest court in the land.   With self employment becoming more and more popular in the UK we ask how this is likely to impact “gig economy” workers.

There are no win-win outcomes following this case, in fact the status of all sides in the so-called “gig economy” is up for reinterpretation. Let’s hope that government is up to the task and is able to draft clearer instructions on this fractious area of tax law so that we can all proceed to negotiate future arrangements between companies and their self-employed contractors or employees within clear guidelines.

The court has issued a press release concerning the background to the appeal, the judgement and the reasons for the judgement. For those readers who are interested in the detail of this case the release is reproduced in part below:

BACKGROUND TO THE APPEAL

The Respondent, Mr Gary Smith, is a plumbing and heating engineer. Between August 2005 and April 2011 Mr Smith worked for the First Appellant – Pimlico Plumbers Ltd – a substantial plumbing business in London which is owned by the Second Appellant, Mr Charlie Mullins. Mr Smith had worked for the company under two written agreements (the second of which replaced the first in 2009). These agreements were drafted in quite confusing terms.

In August 2011 Mr Smith issued proceedings against the Appellants before the employment tribunal alleging that he had been unfairly dismissed, that an unlawful deduction had been made from his wages, that he had not been paid for a period of statutory annual leave and that he had been discriminated against by virtue of his disability. The employment tribunal decided that Mr Smith had not been an employee under a contract of employment, and therefore that he was not entitled to complain of unfair dismissal (a finding that Mr Smith does not now challenge), but that Mr Smith (i) was a ‘worker’ within the meaning of s.230(3) of the Employment Rights Act 1996, (ii) was a ‘worker’ within the meaning of regulation 2(1) of the Working Time Regulations 1998, and (iii) had been in ‘employment’ for the purposes of s.83(2) of the Equality Act 2010. These findings meant that Mr Smith could legitimately proceed with his latter three complaints and directions were made for their substantive consideration at a later date. The Appellants appealed this decision to an appeal tribunal and then to the Court of Appeal but were unsuccessful. They consequently appealed to the Supreme Court.

JUDGMENT

The Supreme Court unanimously dismisses the appeal. Lord Wilson gives the judgment with which Lady Hale, Lord Hughes, Lady Black and Lord Lloyd-Jones agree. The tribunal was entitled to conclude that Mr Smith qualified as a ‘worker’ under s.230(3)(b) of the Employment Rights Act 1996 (and by analogy the relevant provisions of the Working Time Regulations 1998 and the Equality Act 2010), and his substantive claims can proceed to be heard.

Understanding Self Employment Rules in Gig Economy

If you would like to discuss this topic or need further help with self employment or a tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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Company Vehicle Taxation – When is a Car a Van

Understanding if  the vehicle your planning to acquire for your  business is considered by HMRC to be a van as opposed to a car is a key element of company vehicle taxation and well worth researching if o ensure advantage is taken of favourable tax rules.

If you are VAT registered, you can claim back the VAT added to the purchase price (as long as there is no private use in which case you will have to apportion your claim) and the acquisition will qualify for generous tax allowances.

If you buy a car you cannot reclaim the VAT and tax allowances are far less expansive. There are exceptions; for example, if you by a car to use solely as a taxi or driving school vehicle, then VAT is potentially reclaimable and the ability to write off your investment against profits more likely.

Which begs the question, what is the definition of a car for VAT and tax purposes?

According to HMRC’s company vehicle taxation definitions set out in their VAT internal manual we will need to consider the following:

From the outside [car derived] vehicles still look like a car. However, from the inside the vehicles look like and function as a van. This is because:

  • the rear seats and seatbelts have been taken out, along with their mountings;
  • the rear area of the shell is fitted with a new floor panel to create a payload area; and
  • the vehicle’s side windows to the rear of the driver’s seat are made opaque.

HMRC have published a list of car derived vans that distinguishes between those that are considered to be cars and those that are considered to be vans. https://www.gov.uk/government/publications/hm-revenue-and-customs-car-derived-vans-and-combi-vans

A further complication are double cab pick-ups, are they cars or vans? It would seem that if the payload capacity is one tonne or more then the cab would be considered a van, any less than one tonne would be considered a car.

Obviously, these distinctions are important for VAT and tax purposes. If you are considering your options, we can help you research and buy a vehicle that meets your aesthetic needs and is still a tax effective purchase.


Understanding Company Vehicle Taxation

If you would like to discuss this topic or need further help with any accounting or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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Maternity Pay and The Maternity Allowance

Women who find that they are not eligible to claim Statutory Maternity Pay may nevertheless, still qualify for the Maternity Allowance (MA).

The amount of MA you get will depend on eligibility.

You might get Maternity Allowance for 39 weeks if one of the following applies:

  • you’re employed, but you can’t get Statutory Maternity Pay
  • you’re self-employed and pay Class 2 National Insurance (including voluntary National Insurance)
  • you’ve recently stopped working

In the 66 weeks before your baby’s due, you must also have been:

  • employed or self-employed for at least 26 weeks
  • earning (or classed as earning) £30 a week or more in at least 13 weeks – the weeks don’t have to be together

You may still qualify if you’ve recently stopped working. It doesn’t matter if you had different jobs or periods of unemployment.

If you’re self-employed, to get the full amount of Maternity Allowance, you must have paid Class 2 National Insurance for at least 13 of the 66 weeks before your baby’s due.

The Department for Work and Pensions (DWP) will check if you’ve paid enough when you make your claim. They’ll write to you if you haven’t.

If you haven’t paid enough Class 2 National Insurance to get the full rate (£145.18 a week), you’ll get £27 a week for 39 weeks. You still need to meet all the other eligibility criteria to get this amount.

You may be able to get the full rate by making early National Insurance payments. HM Revenue and Customs (HMRC) will send you a letter to tell you how.

To find out more visit the following HRMC web page: https://www.gov.uk/maternity-allowance

Employers should note that the Maternity Allowance is claimed directly by the individual from the Government and any SMP payments must stop when MA payments start. The claimant must keep the employer informed of the date when the Maternity Allowance payments are due to start.


Understanding Employee Rights Maternity Pay

If you would like to discuss this topic or need further help with any accounting or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website http://www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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Proposed Changes to Impact Construction Sector VAT

On the 7th of June the UK government launched an open consultation into the way the VAT Reverse Charge could be applied to construction sector VAT to reduce fraud. The reverse charge process places the responsibility for paying VAT on the customer instead of the supplier.  The Government is inviting feedback on the proposed changes to construction sector VAT which will be of most interest to sub-contractors and contractors carrying out supplies reported through the Construction Industry Scheme.

The draft legislation will make supplies of standard or reduced rated construction services (‘specified supplies’) between construction or building businesses subject to the domestic reverse charge, meaning that the customer will be liable to account for VAT due, instead of the supplier.

The legislation will not apply to specified supplies made to customers who are consumers, or to those that use specified supplies to make other supplies, such as those selling new houses.

The draft tax information and impact note that we have published with this consultation will help explain the potential impact of the proposals on the economy, business, individuals, and other areas.

If you wish to contribute to the consultation or would like to learn more on the proposed change to construction sector VAT then you will find more information on the following web page including the draft legislation and a full explanatory note:  https://www.gov.uk/government/consultations/draft-legislation-vat-reverse-charge-for-construction-services

In their explanatory notes on this topic HMRC said:

What is being done and why

7.1 This instrument, with effect from the 1st October 2019, applies a reverse charge to certain supplies of construction services in order to remove the opportunity for missing trader fraud in the construction sector.

7.2 Missing trader fraud is an organised criminal attack on the VAT system. The fraud is perpetrated through transaction chains in certain business sectors with the loss occurring when the VAT charged by the supplier is not paid to HMRC but is retained by the recipient.

7.3 This type of fraud has been used by criminals to steal billions of pounds in VAT from governments throughout the European Union, both in relation to domestic supplies such as construction services, and also in connection with cross-border intracommunity trading in goods such as mobile telephones, computer chips and emissions allowances. A reverse charge for mobile telephones and computer chips was introduced with effect from 1st June 2007 and one for emissions allowances was introduced with effect from 1st November 2010. Further reverse charge measures were introduced for gas and electricity with effect from 1st July 2014 and for electronic communications with effect from 1st February 2016.

7.4 Construction services have been targeted by criminals because labour-only suppliers in the sector do not incur any significant VAT on their costs but can charge VAT to customers and then go missing, keeping the VAT for themselves. This instrument makes the reverse charge apply to construction services which, for these purposes, have been defined consistently with the activities covered in the Construction Industry Scheme. This is a statutory scheme which is concerned with tackling the risk of direct tax fraud in the construction industry.

7.5 The risk of fraud in the construction industry is principally centered around the supply of construction services between construction businesses in the supply chain and this instrument, therefore, does not require other types of business to apply the reverse charge when receiving construction services and there is also no reverse charge requirement in relation to building and construction materials that are supplied separately and independently of construction services.

7.6 Reverse charge accounting makes it impossible for fraudsters to perpetrate missing trader fraud because the customer rather than the supplier accounts for the VAT direct to HMRC.

7.7 The introduction of the reverse charge in this business sector will mean that businesses will need to adapt their systems and manage their cash flow differently. Due to the large number of small businesses potentially affected by a reverse charge TNA/EM/10-2015.1 3 for construction services the government has given a long lead-in time to help businesses


Although currently not part of UK tax legislation, clients of Bourne Accountancy in the construction industry can be reassured that we are monitoring the proposed changes and  will keep you informed should it become law.  However if you are concerned that you may have changes to disclose, please call us.

CIS Scheme – Proposed Construction Sector VAT Changes

If you would like to discuss this topic or need further help with any accounting or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website http://www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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Business Owner HMRC Obligations

There are a number of Business Owner HMRC Obligations to be aware of, that involve informing HMRC of changes to their business circumstances. In some cases, failure to comply may result in fines.

We have paraphrased some of occasions when you will need to advise HMRC:

  • You must tell HMRC if you decide to change the legal structure of your business, for example if you become a limited company or set up a partnership.
  • you’ll need to tell HMRC if you stop being self-employed or close a limited company. To close a partnership, the nominated partner needs to report this on the final partnership tax return.
  • You don’t need to tell HMRC a partner is joining or leaving unless the partnership is VAT-registered. If your partnership is VAT-registered, you must tell HMRC when a partner joins or leaves within 30 days – you can be fined if you don’t.

If a partner dies or becomes bankrupt you must:

  • If there are 2 partners, the partnership will be automatically dissolved. The remaining partner must re-register for Self-Assessment as a sole trader.
  • If there are more than 2 partners, the partnership will be dissolved unless the partnership has agreed otherwise.
  • If the nominated partner dies, the partnership must nominate another partner and tell HMRC as soon as possible. If they don’t, HMRC will nominate one and write to the partnership. That partner must then complete any outstanding partnership tax returns.

Additionally, if you start to employ staff you must register as an employer with HMRC.

VAT imposes a number of obligations. You will need to advise HMRC of changes to your turnover, businesses activity or if you become a member of a VAT group, and in most cases, you must tell them, within 30 days of the change.

Readers who are clients of Bourne Accountancy can be reassured that will manage this for them (as long as we are given the facts). However if you are concerned that you may have changes to disclose, please call us and we will deal with this for you.

Being aware of your Business Owner HMRC Obligations

If you would like to discuss this topic or need further help with any accounting or tax related matter please contact us via email at bourne@bournetax.com or call us on 0800 680 0413. Bourne Accountancy provide free business advice via our website http://www.bourneaccountancy.co.uk, we also cover the following areas should you wish to meet in person: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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How to Get a Business Valuation

If your interested in getting a business valuation with a view to selling it at some point in the future but your not sure how to break it down and even less sure how to accurately value things like the branding and strength of client relationships then read on.

Myron Jobson, of This is Money, says: Fans of the TV show Dragon’s Den will be familiar with the sight of budding entrepreneurs being taken down a peg or two for over-estimating the value of their companies.
Whether you’re looking to shift your business or you’re simply interested in gauging how much it has grown under your stewardship, getting an idea of how much your company could sell for can help you plan your next steps.

However, putting a pounds and pence figure on your business is easier said than done because you’ll need to factor in more than just crunching numbers on the firm’s balance sheet.  In truth, a lot depends on perception, but there are some fundamentals which feature in most company valuations.

To help you on your way, we’ve asked two experts in the field of business accountancy to offer guidance on how to identify what your company is really worth.

Gary Turner  – Xero Accountancy Software

Gary Turner, managing director and co-founder at cloud accountancy software provider for small business Xero, replies: Most business owners have put a significant amount of time, resource and energy into their venture, so it comes as no surprise that the decision to sell can be an extremely difficult one.  It can be a lengthy process – and that initial decision is long before you’ve gone out and found someone interested in your business.
Determining a sensible and realistic price should be your first step. Buyers are rarely sentimental, so it’s important that the business owner is pragmatic and tries to remove emotion.  Step back and determine where the true value lies. Never let it go for less than it’s worth, but don’t start out with the expectation that it will sell for more.

Business Valuations are usually calculated as multiples of revenue, so a good rule of thumb is to sell your business for two or three times its annual profit.  But while multiples of earnings can be used as a business valuation method, be aware that there is no standard price earnings (P/E) ratio figure that can be used to value every business.

Companies within certain industries, such as IT and technology will typically command a higher ratio than bricks and mortar businesses like cafés or retail shops.
The higher the risk of buying the business – if the business is very reliant on one main product or has a small number of key executives for example – will also mean a lower P/E ratio.

If your business has a high level of tangible assets such as a property company or estate agent, another option is an asset valuation which will give you the net realisable value of all assets minus the total value of its liabilities.  But if you’re still not sure how much to sell your business for, consider getting advice from an accountant or broker.

Due diligence and maintaining a healthy bottom line is all part of the journey to letting go.
Before you start looking for suitors, it’s vital you get your affairs in order to maintain a healthy cashflow to avoid putting off potential buyers, ensuring you get the best deal possible.  It’s important to iron out any financial irregularities to make your company look like an opportunity, not a risk.

Whether you’re lacking detailed records, don’t know how much money you’re making, or can’t easily access the right report, you’ll put a buyer off even if nothing’s wrong.

If you’re selling, seek guidance from an accountant who can help prepare all the right reports you’ll need.  And if you need to, you can appoint a broker to sell the company on your behalf. It will come at a cost – often around 10 per cent of the sale price – but if you want to offload your company it may be the best option.
Remember that the valuation and sale of your business will also fluctuate depending on the market conditions, buyer circumstances, company reputation and the type of clients or customers.

Methods for a Business Valuation

Richard Bland – Pomanda Online Business Valuation Platform

Richard Bland, chief executive officer of Pomanda, a business valuation online platform, adds: There are several ways to reach a valuation – the most common are by comparing yourself to what other similar companies have sold for, or by working out the value of cash your business is expected to generate in the future.

Let’s look first at the comparison method. This uses what those in the finance world call ‘multiples.’ These are numbers based on what companies have sold for in the past.  Different industries have different multiples and within industries the multiples will also vary – take for example a high street retailer, which will typically attract a lower multiple compared to a retail company that does the bulk of its business online.

You can use an online business valuation tool or you can take a DIY approach by looking online for your sector’s industry multiple.

Multiplying your latest earnings before interest, taxes, depreciation, and amortisation (or EBITDA) by your sector’s multiple will give you a guide valuation for your business.  There are two things to watch out for here. Firstly, make sure you’re using the multiple for the industry that’s most similar to the one your business is in.
Secondly, bear in mind that multiples may be based on what public companies have sold for. If you’re a smaller, private company, don’t expect the same number. Your business won’t enjoy the same benefits of scale and, as a private business, your shares are harder to sell.  So you’ll need to revise the numbers down a bit – the hard part is working out by how much.

The second method you can try requires you to work out how you think your business might perform in the years ahead. Take your company’s past performance as your starting point.  Then think about what your growth, margins, capital expenditure and working capital requirements may be in the future. If you think you’re going to grow quicker than in previous years, then adjust growth upwards – but make sure you can justify it.  If it means you need to add some more staff or new machinery to deliver it, then don’t forget to include those costs in the future plans.  Similarly, if you’ve had a large one-off expenditure in the past, then take that out of your assumptions since it won’t be repeated in future.

You are effectively making projections of your future business cash flows, therefore you need to discount the values to arrive at what they are worth today if you had it in your pocket (usually a pound in the future will be worth less than if you had it today).  This gives you another guide to your company’s valuation using discounted cash flow analysis.After you’ve crunched the numbers and done some sums, you will need to prepare a story that backs up your numbers and provides context.  The numbers and the story go hand in hand and need equal attention from you as the business owner – if you don’t know this stuff inside out you will lose credibility.  It can sometimes be difficult for business owners to maintain an objective view; especially since building your own business can often feel like a labour of love.

Remember to keep a cool head, even when people are picking holes in your business valuation, as ultimately these questions are a useful stress test for you.

Finding out what your Business might be worth

Bourne Accountancy provide free business advice via their website http://www.bourneaccountancy.co.uk and if you need further help can assist you to work out a Business Valuation as well as advising you on how to sell your business; contact us via email at bourne@bournetax.com or call us on 0800 680 0413, we cover the following areas: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

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Tax free Income from the Rent a Room Scheme

Since April 2016, the amount of tax-free income you can earn from letting a room in your home with the rent a room scheme has increased to £7,500 per annum, or £3,750 if two persons own a property jointly.

You can use the Rent a Room scheme if:

  • you let a furnished room to a lodger
  • your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning

You can’t use the Rent a Room Scheme if:

  • not part of your main home when you let it
  • not furnished
  • used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
  • The room is in your UK home and is let while you live abroad

If your gross receipts from letting aren’t more than the Rent a Room limit of £7,500 (or £3,750 if jointly owned), you don’t pay tax on your profit. If they’re more than the limit, you may still be able to benefit under the Rent a Room Scheme.

Gross receipts include:

  • rental income (before expenses)
  • any amounts you receive for meals, goods and services, such as cleaning or laundry
  • any balancing charges

If your gross receipts are less than £7,500 (or £3,750), you are automatically exempt from tax on that income.

If you’ve made a loss, however, it may be better for you to pay tax in the normal way – that is, on your receipts less expenses.

If your gross receipts are more than £7,500 (or £3,750), you can choose how you want to work out your tax. It can be the actual profit made (rents less expenses) or the gross rents received less the £7,500 (£3,750) allowance; whichever produces the better result.

Please note Tax allowances are impacted by your individual circumstances so do contact us for personal tax advice, we cover the following areas: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Making the Most of Your Taxable income with the Rent a Room scheme

To find out more about Bourne Accountancy please visit our main website: http://www.bourneaccountancy.co.uk or contact us directly on 0800 680 0413

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Problems Paying Your Tax On Time

You would be hard pushed to find a tax payer who was happy to pay tax. Whatever the economic benefits of taxation, we would all prefer that someone other than ourselves paid the bill, however not paying your tax on time can lead to penalties and trigger tax investigations.

  • Companies are obliged to disclose their corporation tax liabilities in the year in which they are charged. Profits are stated net of tax due and any retained profits are available for the shareholders to draw as dividends.
  • Sole traders and partnerships do not have to disclose current year’s taxation in current year’s accounts. Therefore, conversations about profitability and income tax can be separated.

Hopefully, readers who are self-employed will have settled any income tax due 31 January 2018. If not, HMRC’s debt collectors will no doubt be calling in their dues. There is also the second payment on account for 2017-18 which is due 31 July 2018.

If you have difficulty paying your tax? What is the best strategy?

Without a doubt, it is not burying your head in the sand. HMRC are quite clear in their advice:

  • Contact HMRC as soon as possible. You will have to pay interest if you pay tax late and you may avoid penalties by contacting HMRC.
  • 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.

So, if you’ve missed the payment date for paying your tax, or 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.

You will need to convince the person you speak with at HMRC that you have genuine reasons for late payment, so it pays to get your ducks in a row before you call. Alternatively contact us for personal advice, we understand the needs of business and are able to negotiate with the HMRC on your behalf. Areas we cover invlude: Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham, Whyteleafe.

Avoid HMRC Penalties by Paying Your Tax on time

To find out more about Bourne Accountancy please visit our main website: http://www.bourneaccountancy.co.uk or contact us directly on 0800 680 0413

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Company Van Tax Boost Coming for Green Vehicles

The government is looking at ways to incentivise users of vans to go green. According to the statistics, less than one in every two hundred vans (0.4%) bought in 2016/17 was an ultra-low emission model. To tackle this issue, the government is seeking views on reforms to company van tax or vehicle excise duty as its correctly known which is currently charged at a flat rate of £250 for all vans.

In a company van tax related  matter, the reduced duty rate for red diesel – believed to be holding back the use of cleaner fuels by non-road vehicles and machinery in towns and cities (for example cranes or generators used on construction sites) – is also under the reform microscope.  Red diesel, which accounts for 15% of all diesel consumption in the UK, currently benefits from a reduced rate of 11.14p per litre compared to the standard charge of 57.95p.

A government spokesman is quoted as saying:

“We want to help ‘white van man’ go green. We appreciate that buying a new van is a major investment for small businessmen and women and want to help make environmentally friendly choices more affordable.”

It will explore creating a graduated first year rate for vans, as is already in place for cars. Most van purchases would pay less tax in the first year as a result of the change and more efficient green models would benefit significantly.

These proposed changes are part of wider proposals to improve air quality in our towns and cities.

For example, red diesel contributes to air pollution by producing nitrogen dioxide, a toxic gas that inflames the lining of the lungs. It is particularly harmful for the most vulnerable in our society, such as children with asthma living in urban areas where it is used by non-road vehicles and machinery.

The reduced rate of duty for red diesel costs around £2.4 billion a year in revenue compared to if duty was charged at the main rate. Red diesel for agricultural use, fishing vessels, home-heating and other static generators, will be out of scope.

Bourne Accountancy can advise you on the most tax efficient ways to run a company vehicle, if your based in any of the following areas why not contact us for a consultation: we cover Addington, Ashtead, Banstead, Biggin Hill, Beckenham, Bletchingly, Bromley, Chipstead, Caterham, Carshalton, Coulsdon, Crawley, Croydon, Dorking, Godstone, Horley, Kenyley, Lingfield, Merstham, Oxted, Purley, Redhill, Reigate, Sanderstead, Selsdon, Shirley, Sutton, Tandridge, Tatfield, Warlingham, Westerham and Whyteleafe.

Low Emission Vehicles to Receive Company Van Tax Reduction

To find out more about Bourne Accountancy please visit our main website: http://www.bourneaccountancy.co.uk or contact us directly on 0800 680 0413

IR35 to get a facelift in the private sector

HMRC is launching a new consultation to make sure that people who effectively work as employees pay the right amount of tax.

As announced at the Autumn Budget, the consultation will look at how to increase compliance with the existing ‘off-payroll’ working rules. These rules mean that contractors such as IT and management consultants who work through their own company, but are in practice employed by a third party, pay the right tax as employees.

Evidence suggests that the tax will be lost of up to £1.2bn a year by 2023 as a result of people getting the rules wrong, and incorrectly paying tax as if they were self-employed. The consultation will look at how to make these rules work better. The genuinely self-employed will not be affected.

Last April, the government reformed off-payroll working in the public sector, successfully increasing compliance. The change has meant £410 million in additional revenue. This new consultation includes the option of extending those reforms to the private sector, although no decisions have been made. It draws upon the lessons from the public sector change, by consulting on how the rules can be improved for the private sector and includes alternative options for addressing non-compliance.

Existing off-payroll working rules (IR35) were introduced in 2000 and are intended to stop individuals avoiding employment taxes by working through their own company. IR35 affects contractors including IT consultants, management consultants, and project managers.

HMRC estimates that in 90% of cases within the private sector, the IR35 rules are not applied correctly and we should probably expect that this consultation will result in tightening of the IR35 regulations.

Genuinely self-employed persons will not be affected.

Readers may remember that in April 2017, the government reformed the off-payroll working rules for engagements in the public sector. Public authorities are now responsible for determining whether the rules apply and deducting and paying the appropriate taxes.

Apparently, external research on initial implementation shows that the reform has had relatively little impact on projects or vacancy filling in the public sector.

The consultation will close on 10th August 2018 and we will add further commentary on this topic as and if changes are subsequently made.

Who qualifies for the minimum wage

As you would expect there are a range of conditions that affect the answer to this question. We have reproduced below a summary of the main conditions to be observed.

Workers must be at least school leaving age to get the National Minimum Wage. They must be 25 or over to get the National Living Wage.

Contracts for payments below the minimum wage are not legally binding. The worker is still entitled to the National Minimum Wage or National Living Wage.

Workers are also entitled to the correct minimum wage if they are:

  • part-time
  • casual labourers, for example someone hired for one day
  • agency workers
  • workers and homeworkers paid by the number of items they make
  • apprentices
  • trainees, workers on probation
  • disabled workers
  • agricultural workers
  • foreign workers
  • seafarers
  • offshore workers

 

Apprentices are entitled to the apprentice rate if they’re either:

  • under 19
  • 19 or over and in the first year of their apprenticeship

 

Apprentices over 19 who have completed the first year of their apprenticeship are entitled to the correct minimum wage for their age.

The following types of workers aren’t entitled to the National Minimum Wage or National Living Wage:

  • self-employed people running their own business
  • company directors
  • volunteers or voluntary workers
  • workers on a government employment programme, such as the Work Programme
  • members of the armed forces
  • family members of the employer living in the employer’s home
  • non-family members living in the employer’s home who share in the work and leisure activities, are treated as one of the family and aren’t charged for meals or accommodation, for example au pairs
  • workers younger than school leaving age (usually 16)
  • higher and further education students on a work placement up to 1 year
  • workers on government pre-apprenticeships schemes
  • people on the following European Union programmes: Leonardo da Vinci, Youth in Action, Erasmus, Comenius
  • people working on a Jobcentre Plus Work trial for 6 weeks
  • share fishermen
  • prisoners
  • people living and working in a religious community

Tax Diary May/June 2018

1 May 2018 – Due date for corporation tax due for the year ended 30 July 2017.

19 May 2018 – PAYE and NIC deductions due for month ended 5 May 2018. (If you pay your tax electronically the due date is 22 May 2018)

19 May 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2018.

19 May 2018 – CIS tax deducted for the month ended 5 May 2018 is payable by today.

31 May 2018 – Ensure all employees have been given their P60s for the 2017-18 tax year.

1 June 2018 – Due date for corporation tax due for the year ended 31 August 2017.

19 June 2018 – PAYE and NIC deductions due for month ended 5 June 2018. (If you pay your tax electronically the due date is 22 June 2018)

19 June 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2018.

19 June 2018 – CIS tax deducted for the month ended 5 June 2018 is payable by today.

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Everything you need to know about the new GDPR

On the 25th May 2018, the data protection act will be superseded by a new piece of legislation, the GDPR.

This new piece of legislation has been brought in in order to make sure that every company within the EU, as well as those who trade with the EU are adhering to the same sets of rules and standards when it comes to protecting any data which they are holding on to regarding the individuals they do business with.
Companies will want to get as far ahead of the curve as they can when it comes to implementing these new measures. Preparing early will save businesses a considerable amount of time and stress down the line and will help to ensure compliance when these new rules do come into force.
Here are the new requirements that businesses need to be most aware of in order to ensure that they are ready for the introduction of this new legislation.

Explicit Consent

The new general data protection regulation mandates that businesses must present their customers with the chance to explicitly consent to their personal information being stored. Under the data protection act, it was enough to provide customers with an opt out opportunity, that is no longer the case. The GDPR mandates that customers must be presented with an explicit choice and give their consent in order for their data to be stored. Consent must be given for every piece of information that is to be stored and can be withdrawn at any point.

Demonstrating Compliance

No longer will businesses be assumed to be in compliance with the GDPR until proven otherwise, instead they will need to demonstrate their compliance with the legislation by proving how they comply. To this end, businesses will have to clarify their data and security policies, while also ensuring that every member of staff has been trained on how to abide by the new regulations. Businesses are further required to provide proof of how each piece of individual information is stored upon request.

Breach Reporting

Companies who remain compliant with the GDPR are unlikely to face any problems with data breaches, however, where these breaches do occur, they should be reported within 72 hours of the business becoming aware of the issue. Any business which fails to promptly disclose details of any data breaches that do occur will find themselves running afoul of new legislation and facing even tougher fines than they would have under the data protection act.

Data Protection Officers

The GDPR clearly states that public authorities, as well as those who control and process data and a small number of other specified individuals, have a legal obligation to appoint a data protection officer (it is however recommended that every business appoint a staff member to such a role) The data protection officer needs to have an advanced knowledge of the company’s needs and their data management processes. Check this link in order to find out more about GDPR requirements.

The GDPR looks like a worthy successor to the data protection act that, like its predecessor, will ensure that individual data is held safely, securely, and responsibly.

If your concerned about GDPR and need further advice please get in touch.