5 Creative Tax Reliefs
The Creative Industries have done rather well in the last couple of years as far as tax reliefs go and more are just about to come on stream.
Creative industry tax reliefs (CITR) are a group of 5 Corporation Tax reliefs that allow qualifying companies to claim a larger deduction, or in some circumstances claim a payable tax credit when calculating their taxable profits.
These reliefs work by increasing the amount of allowable expenditure. Where your company makes a loss, you may be able to ‘surrender’ the loss and convert some or all of it into a payable tax credit.
Film Tax Relief (FTR) was introduced in April 2007 and 2 additional reliefs were introduced in April 2013. These are Animation Tax Relief (ATR) and High-end Television Tax Relief (HTR). A fourth relief for Video Games Development was introduced from 1 April 2014. A fifth relief for Theatre Tax Relief is to be introduced in Autumn 2014. HMRC
Let’s take a look at the 5 tax reliefs:
Film Tax Relief (FTR)
Your company will be entitled to claim FTR on a film as long as:
- the film passes the culture test – it is considered a ‘British film’
- the film is intended for theatrical release
- at least 25% of the total production costs relate to activities in the UK
Animation Tax Relief (ATR)
Your company will be entitled to claim ATR on an animation programme if:
- the programme passes the cultural test – a similar test to that for FTR but within the European Economic Area
- the programme is intended for broadcast
- at least 51% of the total core expenditure is on animation
- at least 25% of the total production costs relate to activities in the UK
High-end Television Tax Relief (HTR)
Your company will be entitled to claim HTR on a programme if:
- the programme passes the cultural test – a similar test to that for FTR but within the European Economic Area
- the programme is intended for broadcast
- the programme is a drama, comedy or documentary
- at least 25% of the total production costs relate to activities in the UK
- the average qualifying production costs per hour of production length is not less than £1million per hour
- the slot length in relation to the programme must be greater than 30 minutes
Video Games Development
Your company will be entitled to claim VGTR as long as:
- the video game is British
- the video game is intended for supply
- at least 25% of core expenditure is incurred on goods or services that are provided from within in the European Economic Area (EEA)
Theatre Tax Relief
Details to follow in the Autumn of 2014
steve@bicknells.net
5 ways to pay less VAT
Many small businesses assume there is only one type of VAT scheme, the standard VAT scheme where you pay VAT on Sales and reclaim VAT on Purchases but in fact there are several schemes and they could save you money:
Cash Accounting
Using the Cash Accounting Scheme, you:
- pay VAT on your sales when your customers pay you
- reclaim VAT on your purchases when you have paid your suppliers
You can use the Cash Accounting Scheme if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million.
Cash Accounting can improve your cashflow if your customers pay later than you need to pay your suppliers.
Flat Rate Scheme
You can join the Flat Rate Scheme for VAT and so pay VAT as a flat rate percentage of your turnover if:
- your estimated VAT taxable turnover – excluding VAT – in the next year will be £150,000 or less.
Generally you don’t reclaim any of the VAT that you pay on purchases, although you may be able to claim back the VAT on capital assets worth more than £2,000
There’s a one per cent reduction in the flat rate percentages for your first year of VAT registration.
You can get a list of Flat Rates by following this Link
Flat Rate is easy to use and can save you money if you have a lower than average level of VAT purchases.
Annual Accounting Scheme
Using the Annual Accounting Scheme, you make either nine interim payments at monthly intervals, or three quarterly interim payments, throughout the year. You only need to complete one return at the end of each year. At that point you must pay any outstanding amount. If you have overpaid, you will receive a refund.
You can use the Annual Accounting Scheme if your estimated VAT taxable turnover for the coming year is not more than £1.35 million.
This could save you money by saving time.
Retail Schemes
Using standard VAT accounting, if you are VAT-registered then you must record the VAT on each sale in your accounting records. But with the VAT retail schemes, you work out the value of your total VAT taxable sales for a period – for example, a day – and the proportions of that total that are taxable at different rates of VAT (standard, reduced and zero) according to the scheme you are using. You then apply the appropriate VAT fraction to that sales figure to calculate your VAT due.
You do not need to record VAT separately in your accounts for each and every retail sale you make. This is particularly beneficial if you make a number of low value and/or small quantity sales to the general public. This can save you a lot of time and record keeping.
Margin Schemes
Normally you charge VAT on your sales, and reclaim VAT on your purchases. However, if you sell second-hand goods, works of art, antiques or collectibles, there may have been no VAT for you to reclaim when you bought them. You may be able to use a VAT margin scheme. This enables you to account for VAT only on the difference between the price you paid for an item and the price at which you sell it – your margin. You won’t pay any VAT if you don’t make a profit on a deal. You can still use standard VAT accounting for other sales and purchases such as overheads.
steve@bicknells.net
No more tax this year! Tax Freedom Day was 28th May
May 28th 2014 was the day when average earners had paid their tax for the year and started working for themselves.
It is calculated by comparing general government tax revenue with Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. This year it comes to 41.09%. That percentage is then converted to days of the year, starting from 1 January. The first day of the year that Britons work for themselves rather than the taxman is Tax Freedom Day. (Adam Smith Institute)
This year it was 3 days earlier than in 2013, hooray, lets hope it comes even earlier next year.
So in 2014, for 148 days of the year every penny earned by Britons was taken by the government in tax.
steve@bicknells.net
Employment Status Again!
The importance of “control” in determining the status of self-employed personel
A first Tier Tribunal recently considered the case of Gabriel Oziegbe, who engaged security personel for construction sites. HMRC decided that the personal engaged were AGENCY WORKERS and raised assessments for PAYE & NIC, against which Mr Oziegbe appealed and was successful.
There were two aspects of the appeal that stood out for me:
a) Part of the wording of Mr Oziegbe’s standard contract for services, not only reminded the contractors that they were responisble for thie own tax, he highlighted the fact that although he had some input in the quality and timing of their work he did not control their work (the full wording of this appears in the case report below)
b) His explaination , in tribunal that they had some freedom to operate for as few or as many clients as they wished and thus could affect the amount they earned.
Here is the fuller report of the case as reported by the ICPA:
| Mr. Oziegbe had trained and secured the required licence to act as a security guard and started to work for clients, generally construction companies in 2007. He engaged other similarly qualified security guards when he had work he could not perform personally, entering into Contract for Services agreements with them. The contracts included a number of key aspects normally found in a self-employment relationship including the following in relation to control:“I will not control or have any right to control how you undertake the services to be provided but I am entitled to lay down standards of quality and a time period within which the works must be completed at the commencement of any particular service. You will be obliged to act upon any assignment instruction provided by me.”During the hearing Mr. Oziegbe expanded on the terms of engagement stating that the workers would periodically leave to work entirely on their own account or with some other operator. His letter to HMRC sent in December 2011 was highlighted. In it he confirmed that the security guards he engaged were able to work for as many clients as possible and that he has no direct control while they are were engaged on a job and that they took the risks. The amount of profit they made was in their control. He also confirmed that the security guards had been advised to pay their own tax, and evidence was provided that this had been done for at least four of the people engaged.There was no cross–examination in relation to the contract or letter and the FTT accepted that the statements were broadly realistic. |
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It strikes me that this illustrates the reality of many agents. They do in fact operate remotely from most of thier client’s operation and therefore cannot have a great deal of control over what any operatives do in a remote location.
Perhaps the wording of Mr Oziegbe’s contract and how he explains the position to his contractors is a lesson for anybody who feels that they are at risk from the new Agency Worker Regulations.
Stephen@stephenmilne.co.uk
5 key questions you need to ask your FD
As businesses grow, their needs increase. The person steering the finances needs to be someone who can take on a broad commercial role. Forecasting, IT, tax issues, insurance and back office functions – all these need to run smoothly. But a fast-growth business needs someone who can anticipate both future opportunities and potential problems.
A good financial director will help owner-managers understand which aspects of the business are the most profitable, as well as forecasting ways to exploit other opportunities. (Santander)
So what key questions should you regularly ask your FD…..
- What is our cash cycle and how can we improve it – Cash Cycle Blog
- What Key Performance Indicators should we use and what are they telling us – KPI Blog
- How can we improve profitability – 15 ways to improve profitability Blog
- What is our Business Plan and is it the right plan – Business Plan Blog
- Can we reduce Overheads – 10 creative ways to reduce overheads Blog
steve@bicknells.net
Is your accountant qualified?
The ACCA issued a warning in May after research from cloud accounting software provider ClearBooks showed just 8 per cent of small businesses considered an accountant’s qualifications when choosing one. There is no law preventing anyone from calling themselves an accountant, and that as a result small businesses could be unknowingly paying someone without the necessary skills to handle their finances and help their business grow, who isn’t regulated or insured against risk.
CIMA (Chartered Institute of Management Accountants) Members in Practice are monitored by CIMA for:
- Continuous Professional Development
- Anti Money Laundering Compliance
- Professional Indemnity Insurance
- Continuity Agreements
- Letters of engagement
- Ethical conduct
CIMA operates a Masters degree standard scheme of qualifying examinations for prospective members. It is active in promoting local education, training and management development operations, the promotion of new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. WIKIPEDIA
You can find out more at www.business-accountant.com and www.cimaglobal.com
steve@bicknells.net
10 of the Biggest Headaches of Auto Enrolment for Employers
According to Now Pensions the 10 biggest headaches faced by employers are:
- An administrative nightmare – it doesn’t have to be nightmare provided you plan ahead and get help if you need it, accountants are the most used source of help and advice.
- Will payroll be able to cope? Yes but it takes planning and preparation
- A Communication challenge – Employees find pensions complicated and auto enrolment could be the first long tem savings product they have, so simplicity is crucial. Auto Enrolment does require the right correspondence at the right time, so make sure you get it right!
- Future Liabilities – The Pension Regulator enforces compliance and employers must not encourage or put pressure on employees to opt out.
- Middleware – this is software that makes your IT systems talk to each other, many SME’s will not need middleware as the payroll software will do the job of reporting the data to the pension provider
- Responsibility – Make sure you know where the responsibilities fall on your team, mistakes can be costly
- Existing Schemes – Not all existing schemes will be suitable for auto enrolment, check that your scheme will comply or change it
- Investment – Most employees will have never invested in their lives so its important to choose an auto enrolment provider who can help them decide on which funds to invest in
- Value for Money – NEST, Now Pensions and The People Pensions have very low charging structures
- What will it cost – Don’t forget the internal management costs when you choose a scheme, how easy will it be to operate?
steve@bicknells.net
We hear many of the same concerns about auto enrolment being raised on a regular basis in our discussions with employers of all sizes. So you’re not alone with your auto enrolment concerns. That’s why we’ve addressed ten of the biggest headaches and their remedies below.
1: An administrative nightmare
Get all the help you can before the staging date. Employers can lighten the load by partnering with providers that will do much of the work for them. Some pension providers have invested in technology that can automate the administration of auto-enrolment. This includes assessing which sort of scheme is most suitable for your workforce, working out which employees need to be automatically enrolled and calculating contributions and issuing communications to your employees based on the outputs of the assessment.
Once a clear process is up and running, administering auto-enrolment is relatively easy – but to get to that point organisations need to put the right systems in place. That means selecting your implementation partners, establishing who is responsible for which parts of the process and ensuring clear access to your HR and payroll data. A robust project plan is essential.
2: Will payroll be able to cope?
Yes, provided you make sure the correct people at your payroll provider and your pension provider are talking to each other and exchanging data in the right format.
A strategic decision is necessary to decide on whether payroll will handle employee categorisation ensuring that your auto-enrolment obligations are met compliantly or whether your pension provider will do this. Larger payroll providers and pension providers such as ourselves have the capability to create a record to demonstrate to the Pension Regulator that you have fully complied with your auto-enrolment obligations.
3: A Communications challenge
Employees find pensions complicated, and for many individuals an auto-enrolment pension will be the first long-term savings product they have ever held. So simplicity is crucial.
Research has shown that messages work best when they speak to employees in a language they understand, through a medium via which they like to be communicated. Messages delivered in the run-up to auto-enrolment are particularly important as they will set the agenda for the entire project. So think about what will work best for your workforce. A wealth of compliant communication material that can be tailored to the needs of your workforce is available at no cost from quality pension providers.
4. Future liabilities
The Pensions Regulator enforces compliance with the auto-enrolment rules, and one of its top priorities is ensuring employers do not encourage or put pressure on employees to opt out of the pension scheme after they have been automatically enrolled into it. It will be scrutinising employers that have unusually high opt-out rates. Employers that persistently break the rules by inducing staff to opt-out can be fined up to £10,000 a day. The Pensions Regulator is hoping whistleblowers will report it of breaches of auto-enrolment regulations.
Using compliant communication materials can alleviate the risk of regulatory action. Employers that use pension providers with auto-enrolment middleware will also have a report that demonstrates to the Pensions Regulator that auto-enrolment obligations have been fulfilled, although it will only be as accurate as the information given by the employer.
5: What is ‘middleware’?
Middleware is software that glues different IT systems together. In the context of auto-enrolment, that means analysing the age and salary data of your workforce, working out the earnings upon which contributions are based, taking deductions through payroll and paying them over to the pension provider.
6: Responsibility
For auto-enrolment to run smoothly both your payroll and pensions departments need to talk to each other. Unfortunately the fact that auto-enrolment crosses both areas can lead to confusion over who is responsible for what part of the process. This is best addressed by assigning auto-enrolment to a corporate sponsor high enough up in your organisation to ensure that responsibility for tasks is clearly apportioned, and delegating someone to be involved through the implementation project phase and beyond.
7: Existing Schemes
This will depend on the sort of scheme you have and how you decide to include your 
current non-pensioned staff. If your existing scheme already complies with the minimum criteria set for auto-enrolment, which relate to contribution rates, charges and default funds, then staff already in it will see no change.
You will need to make some important decisions about how you design your pension offering for the rest of your staff. Do you want a single scheme for everyone in the organisation? Do you want a multifaceted scheme for your senior staff and a more basic scheme for other tiers of your workforce? You may choose to preserve your existing scheme for those already in it, while automatically enrolling those not currently in it into a new scheme. Independent Financial Advisers or Employee Benefit Consultants can provide information and advice in exchange for a fee or Providers like NOW: Pensions can help you to analyse your workforce and provide suggestions based on our previous experience.
8: Investment
Many employees will have never invested this way before in their lives. Poor performance will not only create disgruntled employees – it will also leave some staff with pensions so low they cannot afford to retire when they get older. So choosing the right default investment fund is crucial for an employer.
The performance of different pension providers’ default funds varies hugely. Pensions are long-term savings vehicles which means that even very small increases in performance can make a significant difference. For example, over a 40-year investment, an annual return of 7% will deliver a fund 30% higher than one achieving 6%.
Look for a default fund with a proven track record, one that has delivered stable returns over a long period of time and in different market conditions, and is unlikely to have changed as this may increase the associated communication costs with your employees.
9: Value for money
Charges are one of the biggest factors in determining how much pension employees ultimately receive. Sadly, pensions that charges as much as 1.5% of the fund value each year are common in the UK. We charge just 0.3% of fund value plus a monthly £1.50
admin fee (£0.30 for low earners during the initial phasing process). For a 25-year-old earning £26,000 saving 8% of salary for 40 years, that can mean the difference between building up a pot of £716,000 rather than the £547,000* generated in a scheme charging 1.5%. Our low charge scheme gives the saver in this example 30% more pension for exactly the same contributions. It may sound hard to believe, but the more expensive provider takes an extra £169,000 in charges out of the saver’s pot.
*Assumes salary increases by 4% a year, fund increases by 7% a year.
10: What will it cost me?
The overall cost of auto enrolment will depend on where you go for your pension and what you need from your pension.
Costs not only include fees and charges but also, human resources and administration so it is important to bear the overall cost in mind when choosing a pension provider. With NOW: Pensions, the employer can either choose to pay nothing in the way of administration with the fees coming from the members or you may choose to pay these fees for your members (employees); on-going costs such as communications are minimal and there are no set-up fees.
It is important to get your provider right from the start as changing further down the line will incur many additional costs.
– See more at: http://www.nowpensions.com/blog/auto-enrolment-headaches/#sthash.HhCRbQuD.dpuf
What’s in your land? it could be worth a 150% tax deduction
Land Remediation Relief is a relief from corporation tax only. It provides a deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state.
The tax releif is available on both commercial and residential developments.
Qualifying Land Remediation Expenditure can be claimed for tackling pollution, natural issues, such as radon, arsenic or Japanese Knotweed or remediating long term derelict land.
Asbestos is a common issue and qualifies for Land Remediation Relief….
Legislation in The Control of Asbestos Regulations 2006 and The Control of Asbestos Regulations (Northern Ireland) 2007 governs the way that asbestos is removed.
As a result additional costs may be incurred in containing the asbestos and dust during removal.
For example, a licensed contractor must be employed to remove high risk material, such as pipe insulation or asbestos insulating panels.
The additional costs incurred in order to comply with the regulations are part of the cost of removing the asbestos and so may qualify for Land Remediation Relief.
So you don’t have to be Indiana Jones to discover value in your land…
steve@bicknells.net
The mystery of the Specified Charge
Many employers who submit mainly nil returns (ie small owner managed businesses) for RTI are likely to get a letter from HMRC with Specified Charges on them, this is because under RTI if you don’t pay any employees in a pay period you need to submit a return to HMRC, if you forget or mis a period, which with HMRC RTI Basic PAYE Tools is easily done, HMRC will create a charge.
HMRC define a Specified Charge as
These are amounts we have estimated to be due when we have not received the necessary RTI PAYE submissions. We base these on you previous filing and payment history. We do this under Regulation 75A Income Tax (Pay As You Earn) Regulations 2003.
But as its an estimate is unlikely to be correct and on top of that HMRC will probably charge interest based on their Specified Charge.
If you get a Specified Charge check your RTI Submissions to makesure that you haven’t missed any, if you have missed one, post it now and then contact HMRC on Tel. 0300 200 3813.
steve@bicknells.net
HMRC aims to raise further £5bn in tax revenue
Thanks to http://www.freedigitalphotos.net
Her Majesty’s Revenue & Customs (“HMRC”) are seeking new powers as follows:
1. Advance Payment – basically in any dispute between HMRC and a tax payer HMRC would be able to assess what tax they believe is due and require the tax payer to pay this as a sort of ‘refundable deposit’ until such time as the dispute is resolved through arbitration or court. Perhaps more importantly, if granted, these powers will be applied retrospectively.
Given that at the current time there are unresolved cases going back ten years or more and that once HMRC has the tax payers’ money there will be even less incentive for them to come to a resolution then this is essentially HMRC to act as judge, jury, and executioner. Isn’t this simply a ‘guilty until proven innocent’ treatment of tax payers?
2. Direct Debit – where HMRC believe that the tax payer owes them money then they will be able to simply take money directly from the tax payer’s bank account. As I understand it there will be further powers to obtain previous bank statements and this will no doubt lead to further tax investigations.
The legislation which will encapsulate these powers is currently going through Parliament, and despite opposition from lobby groups and committee members alike, HMRC seem intent upon pushing this legislation through with a view to achieving Royal ascent in mid July 2014.
Of course, should HMRC gain these powers they will hit the easy targets first i.e. those who have ‘played by the rules’ and properly disclosed everything through DOTAS, and those who operate proper business bank accounts, so it will do nothing to address those who have hidden their activities from HMRC and those who operate in the black ‘cash-in-hand’ economy.
Whilst the general public may have little sympathy for people who ‘don’t pay their fair share of tax’ (if there is such as thing – see Did Jimmy Carr just use the wrong vehicle?) we have to remember that tax avoidance is entirely legal as it simply takes the rules and regulations enacted in law and uses these to reduce a tax payer’s liability.
The new powers will do nothing to tackle tax evasion, which is illegal, and so it is no surprise that spokesmen for HMRC, and representatives for HM Government, have sought to blur the lines between legal avoidance and illegal evasion in recent times. We can be equally sure that HMRC will not be tackling the multi-nationals like Google and Starbucks who have made recent headlines with their tax affairs, and so it will (as ever) be small firms that will bear the brunt of any HMRC action.
What we shall no doubt see is an increase in non-DOTAS schemes being made available to tax payers by providers of such schemes, and I fear beyond that we shall see a rise in business insolvencies and loss of jobs, all of which will run contrary to HMRC’s aim to raise further tax revenues.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
Business Accountant 