Archive for the ‘Uncategorized’ Category

Did you overclaim the SEISS grant?

Thursday, May 13th, 2021

A reminder that HMRC have set out detailed guidance for the self-employed who may have over-claimed any of their Self-Employed Income Support Scheme (SEISS) grants.

The guidance is reproduced below:

You must tell HMRC if, when you made the claim, you were not eligible for the grant. For example:

  • for the first or second grant, your business was not adversely affected.
  • for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods.
  • you did not intend to continue to trade.
  • you have incorporated your business since 5 April 2018.

You must also tell HMRC if you:

  • received more than we said you were entitled to.
  • amended any of your tax returns on or after 3 March 2021 in a way which means you are entitled to a lower grant than you received.

When you must tell HMRC

 

If you are not eligible and have to pay the grant back, you must tell us within 90 days of receiving the grant.

The process for when and how to tell us is different if amending your return affects your grant amount or eligibility.

If amending your return affects your grant amount or eligibility

You must tell HMRC if there is an amendment to any of your tax returns on or after 3 March 2021 which either: lowers the amount you are eligible for and causes you to no longer be eligible.

If you amend your return before claiming your grant, you must tell HMRC within 90 days of receiving your grant.

If you amend your return after receiving your grant, you must tell HMRC within 90 days of making the amendment.

If you do not tell HMRC you may also need to pay a penalty. HMRC will provide more information about when you may need to pay a penalty by mid May 2021.

You do not need to tell HMRC if the grant amount you are eligible for is lowered by £100 or less.

 

If you are unsure if you are affected by these rules, please call.

Running a limited company

Wednesday, May 12th, 2021

Limited companies are owned by shareholders and managed by directors.

Very often, especially in the case of smaller companies, the owners and managers (shareholders and directors) are the same persons. Unfortunately, each has separate roles and responsibilities. For example, as a director of a limited company you must:

  • follow the company’s rules, shown in its articles of association.
  • keep company records and report changes.
  • file your accounts and your Company Tax Return
  • tell other shareholders if you might personally benefit from a transaction the company makes.
  • pay Corporation Tax.

You can hire other people to manage some of these things day-to-day (for example, an accountant) but you are still legally responsible for your company’s records, accounts and performance.

Also, you may be fined, prosecuted or disqualified if you do not meet your responsibilities as a director

 

Taking money out of a limited company

Directors have a few options when considering how they can withdraw money from their company. For example, they can receive a salary, charge rent to the company if their company has the use of personal assets or charge interest if a director lends money to its company.

Directors who own shares in their company or other shareholders have one income producing option, to take a dividend.

A dividend is a payment made to shareholders out of a company’s taxed earnings. Depending on the level of dividends received, shareholders will pay:

  • No additional tax on dividends received up to £2,000 a year.
  • Dividends that form part of the basic rate band will be charged a hybrid tax rate of 7.5%.
  • Dividends that form part of the higher rate band will be charged at 32.5%.
  • Dividends that form part of the additional rate band will be charged at 38.1%.

Because dividends are a return to shareholders they are not treated as earnings from employment and consequently, no National Insurance arises. For this reason, there is a tendency for director/shareholders to minimise salary payments and maximise dividend payments.

Planning is key

However, it is rare for the tax position of individuals to be the same and for this reason, working out the most efficient way to withdraw funds from a company is paramount. It is not just a question of considering the strategy that produces the lowest tax bill. For instance, if salaries are to be minimised Living Wage rates and entitlement to benefits – particularly the State Pension – may need to be considered.

If it is some since you consider your options, please call so we can help you create the optimum fit for your circumstances.

Are your Child Benefits under threat?

Thursday, May 6th, 2021

For some time now, HMRC have had the power to claw back some or all of the Child Benefits you receive if either parent’s income exceeds £50,000.

The benefit is recovered by the High Income Child Benefit Charge (HICBC). This states that if either parent had income over £50,000 and:

  • either partner received Child Benefit, or
  • someone else received Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.

Then part or all of the Child Benefit received may need to be paid back to HMRC. It doesn’t matter if the child living with you is not your own child.

You may not have considered the HICBC before if your incomes were below the £50,000 cap, but if your income for 2020-21 exceeded this amount you should be aware of the following.

  • The parent with the higher income for 2020-21 (more than £50,000) will need to register to submit a self-assessment tax return and pay any HICBC due – unless they are already registered in which case, they will need to enter the amount of Child Benefit received on their return and pay any tax due.
  • The parent with the higher income, even if they were not the person claiming the Child Benefit, will need to make this declaration.

How will benefits be paid back?

1% of the Child Benefit received will be recovered by HMRC’s HICBC for every £100 the highest earner’s income exceeds £50,000. Accordingly, once the highest income exceeds £60,000 all the Child Benefits received will be reclaimed.

To avoid the charge, it is possible to decline receipt of Child Benefits. Care should be taken in triggering this option as it can have roll-on disadvantages when claiming future State Benefits or obtaining a National Insurance number for children.

To summarise:

  • Parents where the highest income is below £50,000 will not be affected and can continue to claim Child Benefit with no tax claw back.
  • Parents where the highest income is above £50,000 but below £60,000 will be affected and will need to pay the appropriate HICBC.

There are strategies that you could use to reduce your taxable income below the £50,000 or £60,000 thresholds as these are calculated net of any allowable deductions.

Please call if you would like more advice regarding these deductions or dealing with your registration for self-assessment, if required.

Data Protection obligations

Tuesday, May 4th, 2021

Everyone in business that handles personal data must register for data protection purposes with the Information Commissioners Office.

Most business will need to pay an annual fee of £40 or £60 but this can rise to £2,900. Some organisations only pay £40 regardless of their size and turnover. These are: charities and small occupational pension schemes.

If you need to register, there is an online process you can use at https://ico.org.uk/for-organisations/data-protection-fee/self-assessment/.

What is personal data?

Understanding whether you are processing personal data is critical to understanding whether the UK GDPR applies to your activities. Generally speaking, personal data is information that relates to an identified or identifiable individual. The following additional definitions are reproduced from the ICO website:

  • What identifies an individual could be as simple as a name or a number or could include other identifiers such as an IP address or a cookie identifier, or other factors.
  • If it is possible to identify an individual directly from the information you are processing, then that information may be personal data.
  • If you cannot directly identify an individual from that information, then you need to consider whether the individual is still identifiable. You should consider the information you are processing together with all the means reasonably likely to be used by either you or any other person to identify that individual.
  • Even if an individual is identified or identifiable, directly or indirectly, from the data you are processing, it is not personal data unless it ‘relates to’ the individual.
  • When considering whether information ‘relates to’ an individual, you need to consider a range of factors, including the content of the information, the purpose or purposes for which you are processing it and the likely impact or effect of that processing on the individual.
  • It is possible that the same information is personal data for one controller’s purposes but is not personal data for the purposes of another controller.
  • Information which has had identifiers removed or replaced in order to pseudonymise the data is still personal data for the purposes of UK GDPR.
  • Information which is truly anonymous is not covered by the UK GDPR.
  • If information that seems to relate to a particular individual is inaccurate (i.e., it is factually incorrect or is about a different individual), the information is still personal data, as it relates to that individual.

A new government-backed loan scheme

Tuesday, May 4th, 2021

A new Recovery Loan Scheme was launched 6 April 2021, to provide much needed liquidity to businesses affected by COVID lockdown measures. Under the scheme, loans of up to £10m are available. The minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Potentially, these loans will be attractive to businesses in retail and hospitality that are gradually being allowed to reopen.
As with the Bounce-Back Loans, the government is providing lenders – the high street banks – with a measure of guarantee to underwrite their risks.
In a recent press release government confirmed:
The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders. 
26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. 
The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.
Business owners who are considering a recovery loan should apply the usual considerations. i.e., can they afford the interest and capital repayments.
Please call if you would like help considering your options.

 

Charity – using a subsidiary trading company

Tuesday, May 4th, 2021

One or more charities can set up a subsidiary trading company to trade on their behalf. This may be a useful strategy if your charity:

  • makes profits on trading that is not linked to its primary purpose
  • makes a profit that comes close to or is higher than the small trading tax exemption limit
  • wants to protect its assets from any trading losses
  • wants to have a separate organisation to carry out all its trading activities

VAT considerations

A charity’s trading company will not have to pay VAT on:

  • profits it makes from donated good sales (as long as it gives these profits to the parent charity)
  • fundraising events it runs for its parent charity

Other types of VAT relief that charities get are not available for their trading subsidiaries.

Trading companies must pay tax and VAT on all their other income and profits in the same way as ordinary limited companies.

Averaging profits for creators of literary or artistic works

Tuesday, May 4th, 2021

A special relief is available for creators of literary or artistic works under which they can claim to add together their profits for 2 years and be taxable on the average of those profits if certain conditions are met. This helps to even out fluctuating tax charges for creative persons who may pay little tax one year but perhaps higher rates of Income Tax the following year. The averaging process may help to reduce overall liabilities.

You can claim averaging if your profits come from disposing of works or from royalties you get for allowing people to reproduce your works. So, for example, you can claim if you are:

  • an author whose income comes from the sale of your written work – even if a small part of your income comes from personal appearances
  • a computer software writer whose income comes from royalties for reproducing the code you write, which is protected by copyright

You cannot claim averaging if your profits come from the services you provide. So, for example, you cannot claim if you’re:

  • an architect whose income comes mainly from your services – even if some of your income comes from selling material protected by copyright
  • a computer programmer whose income comes from the service of writing scripts or programs, not the actual works

Advisory Fuel Rates from 1 March 2021

Tuesday, May 4th, 2021

The advisory electricity rate for fully electric cars is 4 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.

The advisory fuel rates for petrol, LPG and diesel cars are shown in these tables.

From 1 March 2021

You can use the previous rates for up to 1 month from the date the new rates apply.

Engine size

Petrol – rate per mile

LPG – rate per mile

1400cc or less

10 pence

7 pence

1401cc to 2000cc

12 pence

8 pence

Over 2000cc

18 pence

12 pence

 

Engine size

Diesel – rate per mile

1600cc or less

9 pence

1601cc to 2000cc

11 pence

Over 2000cc

12 pence

Tax Diary May/June 2021

Tuesday, May 4th, 2021

1 May 2021 – Due date for Corporation Tax due for the year ended 30 July 2020.

19 May 2021 – PAYE and NIC deductions due for month ended 5 May 2021. (If you pay your tax electronically the due date is 22 May 2021).

19 May 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2021.

19 May 2021 – CIS tax deducted for the month ended 5 May 2021 is payable by today.

31 May 2021 – Ensure all employees have been given their P60s for the 2020-21 tax year.

1 June 2021 – Due date for Corporation Tax due for the year ended 31 August 2020.

19 June 2021 – PAYE and NIC deductions due for month ended 5 June 2021. (If you pay your tax electronically the due date is 22 June 2021)

19 June 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2021.

19 June 2021 – CIS tax deducted for the month ended 5 June 2021 is payable by today.

Beware trading into insolvency

Thursday, April 29th, 2021

The present pandemic has created just the right conditions for certain businesses to trade their way into insolvency.

As we start the gradual withdrawal from lockdown, consumers will be on the lookout to spend after months of enforced home “arrest”. This will likely fuel an increase in economic activity on an unprecedented scale as we bounce-back towards pre-pandemic levels.

But isn’t this good news?

Under normal circumstances, yes, this is great news, but unfortunately, many businesses have needed to spend reserves and borrow in order to survive the last fifteen months of COVID disruption. They are standing on the starting line for a marathon, wearing slippers; unprepared financially for what is about to unwind.

Does your business fit into this category?

  • Cash reserves are limited
  • Losses have stripped away accumulated profits
  • You are obliged to offer better terms of trade to your customers than you receive from your suppliers. i.e., you sell goods on say 60-days credit terms but pay your suppliers for raw materials cash on delivery.

But why does this matter if sales are profitable?

When you sell goods on credit – 60-days in our example – for those 60 days you will have to pay suppliers and other overheads, wages, rent and other costs, before cash arrives in your bank account for sales made almost two months ago.

Ironically, the more successful you are in creating new sales, the more damaging this funding crisis potentially becomes. In accounting speak, you will be over-trading.

Planning is critical

If your business fits the description we have outlined above it is imperative that you plan your business growth. It may still be possible to manage higher sales as long as you organise cash-flow support to fund costs until higher sales, and therefore retained profits, provide you with the resources to self-sustain future growth.

No business owner should have to suffer the financial tragedy of over-trading through lack of planning. Pick up the phone, we can help.