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Are you paying enough? New Minimum Wage
From the 1st October 2015 the new National Minimum Wages (NMW) came into force
| Year | 21 and over | 18 to 20 | Under 18 | Apprentice* |
|---|---|---|---|---|
| 2015 (from 1 October) | £6.70 | £5.30 | £3.87 | £3.30 |
| 2014 (current rate) | £6.50 | £5.13 | £3.79 | £2.73 |
With a further increase in April 2016 for over 25’s to £7.20 per hour. The April 2016 wage will be called the Living Wage.
Penalties for non compliance are already harsh and as reported by the BBC on 1st September 2015 they are getting tougher…
These include doubling penalties for non-payment and disqualifying employers from being a company director for up to 15 years.
The government also announced plans to double the enforcement budget for non-payment and to set up a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the wage they are due.
Penalties for non-payment will be doubled, from 100% of arrears owed to 200%, although these will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker.
Are you paying enough?
steve@bicknells.net
Breaking up is hard to do? (Demergers)
A demerger is a form of corporate restructuring in which the entity’s business operations are segregated into one or more components. (Wikipedia)
Demergers are not defined in Tax Law but can be successfully used by Trading Companies and do get special tax treatment.
CTA10/S1075 & TCGA92/S192
A demerger is a series of transactions which have the effect and purpose of dividing the trading activities carried on by a single company or group of companies between two or more companies or groups of companies. CTA10/S1075 and TCGA92/S192 provide special tax treatment if certain conditions are met. Companies may seek advance clearance under CTA10/S1091 that proposed transactions will be an exempt demerger. CTM17200 onwards gives further guidance on the action to be taken by local offices in dealing with demergers.
Basically there are 3 ways to do Demergers
- Distribution in specie – CTM17250
- Liquidation
- Reduction in Capital
Property Investment Companies are not trading companies so demergers are extremely complicated as explained in this article in Taxation
steve@bicknells.net
Will CIS apply to my property ‘refurb’? do Landlords need to register?
![fotolia_1931265[1]](https://business-accountant.com/wp-content/uploads/2013/09/fotolia_19312651.jpg)
Many small scale property developers don’t realise that the Construction Industry Scheme (CIS) applies to them.
HMRC are also looking very closely at Landlords (Investors) to see if they should register too…
Terrace Hill (Berkeley) Ltd v HMRC [2015] UKFTT 75 (TC) TC 04282
Until now property investment has been excluded from CIS but HMRC say this is under review
http://www.hmrc.gov.uk/manuals/cisrmanual/cisr12080.htm
For now let’s focus on Property Developers, here are a few facts:
- Property development is a trade it includes building new buildings and improving or refurbing existing buildings
- Property developers will be contractors because they employ subcontractors – bricklayer, carpenters, painters, electricians, plasterers etc
- There is no lower limit below which you do not have to operate CIS
- Subcontractors, especially Labour Only subcontractors need to have their employment status tested
- Subcontractors need to be verified with HMRC to determine their tax status before they can be paid
- Each month the Developer will need to file a return with HMRC of subcontractor deductions
- Each month the subcontractors must be given a deduction statement
- CIS applies to all types of Developer – Individuals, Partnerships and Companies
Failure to comply means big penalties
Here are some penalty horror stories!
Brian Parkinson a gardner and lanscaper who used occasional subcontractors and got £31,500 in CIS Penalties!
The FTT heard evidence that little or no loss of tax resulted from this omission, as the amount of tax Parkinson ought to have deducted under the CIS was put at £837.90. [Brian Parkinson and the Commissioners for Her Majesty’s Revenue & Customs TC04526; Appeal number: TC/2013/00224].
This comprised £6,000 (5 x the £1,200 maximum) charged under the Taxes Management Act 1970 (TMA 1970), s98A(2)(a) and also month 13 penalties of £25,500 charged under TMA 1970, s. 98A(2)(b). – See more at: https://www.accountancylive.com/partial-win-gardener-over-%E2%80%98excessive%E2%80%99-cis-penalties#sthash.zJA59Gjv.AfCNNGRJ.dpuf
INCOME TAX – subcontractors – appellant company contracted with a third party provider to supply “operatives” – third party provider “net” for CIS purposes – company’s failure to make CIS returns – fixed monthly penalties of £28,500 – Month 13 penalties of £56,500 – whether reasonable excuse – held, no – whether disproportionate as a breach of A1P1 – Tribunal’s jurisdiction and interaction with mitigation – Bosher followed – fixed penalties upheld – Month 13 penalties set aside as excessive – appeal allowed in part
If you’re a property developer make sure you register for CIS with HMRC!
If you need help contact us
steve@bicknells.net
Would you like to pay less VAT? have you tried Flat Rate?
Google Docs Link https://docs.google.com/spreadsheets/d/1NyVN2XW3hjpcAYFdjGPCrbeMa-HyfOcgy3eKnNj2wi0/edit#gid=68376799
Usually, how much VAT a business pays or claims back from HM Revenue and Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT over to HMRC
- you keep the difference between what you charge your customers and pay over to HMRC
- you can’t reclaim the VAT on your purchases – except for certain capital assets over £2,000
To join the scheme your VAT turnover must be less than £150,000 (excluding VAT) and you must apply to HMRC.
You can join the scheme:
- online – when you register for VAT
- by post – fill in VAT600 FRS and send it to the address on the form (or use VAT600 AA/FRS to apply for the Annual Accounting Scheme at the same time)
Confirmation you’ve joined the scheme is sent to your VAT online account (or in the post if you don’t apply online).
In your first year as a VAT-registered business the rate is reduced by 1% until the day before your registration anniversary.
The Flat Rate Scheme has its own Cash Basis and Retail Systems. (VAT Notice 733)
Try our calculator to see if you could save money!
steve@bicknells.net
Can my Pension buy shares in my company?
A pension scheme can buy quoted or unquoted shares in a company based either in the UK or overseas.
An occupational pension scheme can buy shares in one or more of the employers participating in the scheme as long as both the following conditions are met:
- the total value of the scheme funds invested is less then 20% of the net value of the pension scheme funds
- the amount invested by the scheme in the shares of any one employer participating in the scheme is less than 5% of net value of the pension scheme funds
Any investment larger than this will be an unauthorised payment and both the scheme employer and scheme administrator will have to pay a tax charge on the amount above the limit.
https://www.gov.uk/pension-trustees-investments-and-tax
So in theory, yes, it is possible, but in reality its likely to fail because:
- An independent ‘Arms Length’ valuation will be required, for an unquoted small business or start up this is extremely difficult as establishing a market value for the shares will be difficult and often a start up will have losses in the first few years
- The HMRC’s rules which govern all registered pension schemes (in particular the sections covering both taxable property and tangible moveable property) dictate that the combined shareholding in the unquoted company held between the pension fund, the member personally and any other connected persons must never exceed 19%, otherwise there would be enormous tax consequences for all concerned
- The company concerned must not (and never should be in the future) controlled by the trustees of the pension fund in conjunction with connected parties
If the business needs the money to buy commercial premises for its trade it would be easier for the pension scheme (SSAS) to lend the money, a SSAS can lend up to 50% of net scheme assets as explained in in this fact sheet from Curtis Banks
If you are over 55, you could also consider drawing down funds from your pension, the first 25% will be tax free.
steve@bicknells.net
Do you have a great business proposal and strategy that will work?
Sometimes even the best ideas don’t get funding at first….
But if you have the right strategy you can still succeed, that’s why a business plan is really important
Approximately a third of all SME’s in the UK don’t have a Business Plan, that’s about 1.5m businesses, so if you don’t have one, here are some reasons why you should prepare one….
- Research by Exact Software shows that SME’s with Business Plans make 20% more profit
- Having a business plan doubles your chances of increasing profits, increasing revenue, attracting new clients
- A well-researched business plan which includes the right figures and realistic forecasts will reassure potential investors you are a sensible investment opportunity
- A Business Plan will help you set out and achieve your goals
- It will help you set goals for your managers and staff
- The Business Plan will help you plan your cash flow and forecast Capital Expenditure
- A Business Plan will help you secure Business Finance and Loans
- You can plan your succession strategy or prepare the business for sale
- A Business Plan tests the feasibility of your business idea
- It will help you plan for the recruitment of Staff
steve@bicknells.net
What exactly is the NEST web services or API tool??
NEST is a government backed pension scheme which has an obligation to accept all employees into the scheme. NEST is completely government backed, designed specifically to deal with auto enrolment and is free for all employers, no matter how big or small. To date, over 20,000 employers have chosen NEST as an AE pension scheme for their employees.
NEST web services / API tool
NEST are working with a number of key payroll providers to launch a web service or API tool to customers this winter. The tool will take away some of the stress and time consuming steps involved in submitting data to NEST. The web services will mean that customers can send data files through the payroll directly into NEST. With a simple click of a button, customers will find the process a lot faster. A similar concept would be the RTI function where a user can submit their data directly to HMRC within the payroll.
Currently, employers or bureaus have to export data from their payroll, log into the NEST web portal service and submit the data. Under auto enrolment, this needs to be completed every pay period as part of the mandatory employer duties. The benefit of the new NEST web services will be to speed up the data flow between payroll software and the pension provider, saving employers and payroll bureaus time.
BrightPay is delighted to announce that we are working directly with the NEST development team to offer this web services tool to our customers. The direct integration between BrightPay and NEST will be important for the thousands of employers that have and will have chosen NEST as their workplace pension scheme.
According to NEST:
“The ability to submit key data in one click will also result in faster processing times. This innovation will simplify the exchange of information between employers and NEST by enabling payroll software to ‘talk’ to NEST.”
It will undoubtedly make automatic enrolment data submissions to NEST much easier and faster. The news of the NEST web services will be greatly received across the payroll industry. It has been further speculated that other pension providers may follow suit and develop their own API tool.
Related articles – The Benefits of NEST’s API / Integration Tool for Accountants & Bureaus.
Can you Zero Rate Charity adverts?
The supply of advertising to a charity is zero-rated. The zero-rating covers advertisements on any subject, including staff recruitment. A charity can also purchase pre-printed collecting boxes, envelopes and appeal letters at the zero rate. Low cost lapel stickers, emblems and badges that a charity gives in acknowledgement of a donation can also be zero-rated. More information can be found in Notice 701/58 Charity advertising and goods connected with collecting donations.
In what media can charities advertise VAT free?
Any medium which communicates with the public. This includes all the conventional advertising media such as television, cinema, billboards, the sides of vehicles, newspapers and printed publications. The important factor is whether the advertisement is placed on someone else’s time or space. If it is not there will be no scope for zero-rating.
If space is sold to a charity for advertising on other items, such as beer mats, calendars, or the reverse of till rolls, this will also be covered by the zero rate. The sale of the items themselves will not be VAT free, unless they qualify for other reliefs for example as books or children’s clothing.
Recently I was asked if a website would be able to zero rated, but its specifically excluded under UK Law VCHAR11000
10B None of items 8 to 8C includes a supply used to create, or contribute to, a website that is the charity’s own.For this purpose a website is a charity’s own even though hosted by another person. 10C Neither of items 8 to 8C includes a supply to a charity that is used directly by the charity to design or produce an advertisement.
steve@bicknells.net
It’s a Pool Car isn’t it?
Yet again, we have another case on Pool Cars which could have been prevented had the right procedures been put in place.
The Case was decided in May 2015 and involved Mark and Trudie Holmes and their company KMS Logistics (UK) Ltd. The company owned 7 prestige cars which were used assist in maintaining and attracting clients.
There was no prohibition (not even a verbal one) on the private use of the vehicles, mileage logs showed that the cars were mainly used by Mr & Mrs Holmes. Until 2003/4 they had been declared as a benefit in kind but then the stopped being declared! There even seemed to be confusion over who owned the cars.
So not surprising Mr & Mrs Holmes lost the case.
Read the full details by clicking here
So what should you do to prove there is no private use:
- Keep the car on the company’s business premises
- Keep the keys at the company’s business premises
- Prepare a Board Minute
- Make sure your contract of employment bans private use
- Keep a mileage log
- Insure the car principally for business use
HMRC have specific rules on keeping vehicles at home in EIM23465
Even if you do meet the 60% rule you still have to prove ‘no private use’
steve@bicknells.net
Are you too busy to do your accounts?
When you start a business its because you have a skill or product that clients want and most small businesses put off the accounting because they find it boring, time consuming and unproductive. This often causes huge problems with tax, cash and business management.
What if it wasn’t boring, what if it was easy and quick to do?
- Apps for invoicing
- Available every where all the time on all your devices
- Automatic bank feeds to reduce data entry
- Dashboards of key data
- Easy access for you and your accountant
That’s why cloud accounting systems are the future. Take a look at this infographic produced by Sage.
Obi Wan Kanobi might not be you’re only hope, cloud accounting could save your business.
steve@bicknells.net
Business Accountant 