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Trainee Accountant Vacancy
Training for Chartered Management Accountant
If you have graduated in the last year and are looking for your first job after university there are some fantastic opportunities in Glasgow including a position at Alterledger as Trainee Accountant.
New office for Alterledger
Growing the business and the team
We are pleased to announce that Graham has joined the team as Trainee Accountant and will be working through his ACCA qualifiation. For more information, please visit the Alterledger website.
The new regulations came into force on 6th April 2015 setting the following thresholds for small companies
|Average no. of employees||50|
Medium Company thresholds will now be
|Average no. of employees||250|
Micro Entities thresholds are unchanged
|Average no. of employees||10|
As before its a 2 out of 3 test. The Audit thresholds are unchanged.
Micro entities are no longer required to produce a directors report.
The new thresholds will apply to financial years beginning on or after 1 January 2016. However, early adoption is permitted.
Further details in SI2015/980
You are the sole director in a company that undertakes some R&D. The annual profit is estimated at £140,000 for the year ended 31 March 2016 before taking into account the director’s remuneration.
You might think that the most tax-efficient remuneration package is £10,600 for 2015/16 to cover the personal allowance and then net dividends of £28,606 to take the director up to the basic rate band. You also need to consider whether the company can make an R&D relief claim and, if it can, how this might affect your decision.
Salary vs Dividends
If the director takes a typical remuneration package, then the net tax and NI savings over taking a salary of £39,206 would be £5,265, assuming the £2,000 employment allowance is available. This saving is made because dividends received within the basic rate band attract no further income tax plus no NI for the director or the company. This more than outweighs the additional corporation tax suffered on profits retained for dividends.
Taking R&D relief into account
From 1 April 2015 the R&D tax credit for SMEs increased from 225% to 230%. There is no R&D uplift on dividends received – only on salary. This means that paying a £39,206 salary would actually result in a saving over taking a small salary and dividends of £1,208.
What about a larger salary? In fact, if the client wanted to take out more than the basic rate band, then the salary may become even more tax efficient. A £70,000 salary would result in net tax/NI due of £1,366 after the R&D relief (assuming there was sufficient profit to offset the CT relief), whereas a salary of £10,600 and net dividends of £59,400 would result in net tax/NI of £5,883 – so the saving by taking a salary over dividends is £4,517.
HMRC will generally not accept 100% of a director’s salary costs within the R&D claim unless it can be clearly demonstrated that the director was exclusively involved in R&D activity.
While dividends don’t qualify as eligible staff costs for R&D claims, company pension contributions do. New pension freedoms make pension contributions a much more attractive option, so you might want to consider this as part of your remuneration package.
If a company makes pension contributions of £40,000 for the director and they spend 60% of their time on R&D, the R&D relief on this will be £55,200 (£40,000 x 60% x 230%). This means that the overall CT saving on the pension contribution will be £14,240 (((£40,000 x 40%) + £55,200) x 20%). As there’s no NI due on pension contributions, this is an even more efficient option than taking additional salary.
Get the best deal for yourself
For advice on the best split between salary and dividends or help with setting up a limited company and registering for VAT, please contact Alterledger.
Directors (participators in a closed company) often borrow money from their companies with the intention of paying a dividend to repay the loan.
If the loan is outstanding more than 9 months after the company year end, then an extra 25% corporation tax charge is due, this is the s455 tax which is refunded when the loan is repaid as explained in this blog
HMRC were concerned that some participators were avoiding this tax by raising funds short term to repay an outstanding loan. They would then draw a new loan very shortly afterwards – HMRC refer to this as “bed and breakfasting”. New anti-avoidance rules were therefore introduced in 2013.
These new rules incorporate two provisions – the “30-day rule” and the “intentions and arrangements” rule.
This applies where within a 30-day period:
- a shareholder makes repayments of their s455 loan; and
- in a subsequent accounting period, new loans or advances are made to the same shareholder or their associate.
So basically prevents the use of ‘Bed & Breakfasting’
‘intentions and arrangements’ Rule
Relief is denied regardless of the 30 day rule, if prior to repayment there is an outstanding amount of at least £15,000 and at the time the amount is repaid to the company, any person intended to redraw any of that amount or had made arrangements to make a new withdrawal; and a new withdrawal is made.
The relief denied is the lower of the amount repaid and the amount redrawn.
How to maximise your VAT reclaim
Plan ahead and reclaim everything
If you are setting up a business and can ahead, you can register for VAT from the date your business will start. For most traders there is not any restriction on the date the business can start, but for some professional services eg barristers and advocates, no trade exists until they qualify. To maximise the VAT to be reclaimed, the sole trader can register for VAT in advance of date of commencement, effective the date they are due to qualify. This means that the VAT registration will be in place from the 1st day of trading and all sales invoices can be issued as VAT invoices.
There are specific rules allowing pre-registration VAT to be reclaimed, but any claims to recover pre-registration VAT must relate to the same trade and made by the same person. A sole trader who incorporates the business is not the same legal person as the new company. Any VAT suffered by the (unregistered) sole trader can’t be claimed as pre-registration VAT by the new company.
Get help with registering
Your accountant will be able to register you for VAT and recommend the best scheme for you. It can take a few weeks for HMRC to process applications, but accountants who are registered as agents with HMRC are likely to have a quicker turnaround time. For advice on registering for VAT and setting up your invoices, please visit the Alterledger website.
Childcare vouchers to be withdrawn for new employees
The existing benefits available in the form of childcare vouchers to employees will be withdrawn to new entrants in the Autumn of 2015. The current scheme saves National Insurance contributions for both employers and employees. Employees also save income tax.
New scheme to start in Autumn 2015
The new scheme for childcare vouchers will not be as good for many employees who currently benefit from the current scheme, but where both parents work and are self employed, they can get the government to pay £2,000 towards registered childcare.
How do I set up childcare vouchers?
Childcare vouchers are set up through your payroll scheme and must be available to all eligible employees to receive the tax benefit.
Alterledger can help
For more information on saving employer’s national insurance and preparing for changes to childcare vouchers, contact Alterledger or visit the website alterledger.com.