Archive for the ‘Uncategorized’ Category

Sponsoring a charity

Tuesday, August 3rd, 2021

Charity sponsorship payments are different from donations because your company gets something related to your business in return. Typically, your business brand would be promoted by the charity in some way.

You can deduct sponsorship payments from your business profits before you pay tax by treating them as business expenses.

Payments qualify as business expenses if the charity:

  • officially supports your products or services,
  • allows you to use their logo in your own printed material,
  • allows you to sell your goods or services at their event or premises,
  • links from their website to yours.

If you are unsure whether a charity payment qualifies as a sponsorship payment or a donation, contact the HMRC charities helpline, 0300 123 1073.

Tax-free property and trading income

Tuesday, August 3rd, 2021

You can claim up to £1,000 each tax year in tax-free allowances for property or trading income. If you have both types of income, you will qualify for a £1,000 allowance for each.

If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. You may be required to complete a tax return for other income.

Likewise, if your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC.

If your annual gross trading or property income, from one or more trades or businesses is more than £1,000 you can use the tax-free allowances instead of deducting any expenses or other allowances.

This would be useful if your actual expenses were lower than the £1,000 allowances. However, you cannot use the allowances to create a trading loss. You can deduct up to £1,000, but not more than the amount of your income. This is known as ‘partial relief’.

If your expenses are more than your income it should be beneficial to claim expenses instead of the allowances.

You cannot use the allowances in a tax year, if you have any trade or property income from:

  • a company you or someone connected to you owns or controls,
  • a partnership where you or someone connected to you are partners,
  • your employer or the employer of your spouse or civil partner.

You cannot use the property allowance if you:

  • claim the tax reducer for finance costs such as mortgage interest for a residential property,

deduct expenses from income from letting a room in your own home instead of using the Rent a Room Scheme.

Tax Diary August/September 2021

Tuesday, August 3rd, 2021

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

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

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

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

1 September 2021 – Due date for Corporation Tax due for the year ended 30 November 2020.

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

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

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

VAT – Second-hand cars – using the Margin Scheme

Tuesday, August 3rd, 2021

If you sell second-hand vehicles and you were not charged VAT when you purchased the vehicle, using the Margin Scheme will save you money.

If you did not use the VAT Margin Scheme, you would have to account for VAT on the full selling price of each vehicle. However, if you use the Margin Scheme, you can account for VAT on the difference between the price you paid for a second-hand vehicle and the sales price when you sell the car.

If you sell a vehicle for less than you paid for it, you will not have to account for any VAT on the sale.

You do not have to use the Margin Scheme, it is optional.

If you decide to use it, there are conditions you will have to meet. If you cannot meet all the conditions, you cannot use the scheme.

The main conditions published by HMRC are:

  • the vehicles must be eligible,
  • you must have acquired the vehicles in eligible circumstances – in most cases, this means that you have obtained eligible vehicles for resale in circumstances where VAT was not chargeable,
  • you must calculate the margin in accordance with the rules of the scheme, there are special rules about how to calculate your buying price, your selling price and your margin under the scheme, your margin may not be the same as your profit margin,
  • you must meet the record-keeping rules of the scheme, there are special rules about invoicing and stock records.

Business entertaining and tax relief

Tuesday, August 3rd, 2021

Expenditure on business entertainment is not allowable as a deduction against profits. Nor may a deduction be made for any expenditure which is incidental to business entertainment.

The meaning of ‘incidental’ is not defined by HMRC but should be interpreted to mean any expenditure that is incurred directly or indirectly in connection with the provision of entertainment.

This might include payments to a third party for the organisation of entertainment or the costs of issuing invitations to customers. It will also include the cost of maintaining assets, such as yachts, which are used for business entertainment purposes.

Traders may obtain entertainment through barter arrangements in which their own goods or services are exchanged for hospitality. The amount to be disallowed is the larger of:

the value at which the transaction is recognised in the profit and loss account, and

the cost of the goods or services exchanged for business entertainment.

The furlough cliff edge

Thursday, July 29th, 2021

Unless government has a change of heart the present furlough scheme will close 30 September 2021.

Businesses that have depended on this grant to hold teams together will – from 1 October – need to decide if business activity has increased sufficiently to maintain their workforces at current levels or consider redundancy options.

Planning is an obvious key requirement at this critical time.

Affected businesses should consider creating a forward estimate of sales and costs and see how these activity financials affect cash-flow and solvency.

One obvious difficulty in preparing these forecasts is trying to double guess the effectiveness of government efforts to control COVID disruption. The recent relaxation of social distancing rules may seem like a step in right direction but what if this overloads the NHS?

Vulnerable sectors remain the entertainment and hospitality trades. However, if further lockdown is required how will this affect business confidence and activity?

We must assume that uncertainty due to the COVID situation will remain with us for some time to come. Which elevates planning akin to sticking a pin on a map wearing a blindfold.

And yet plan we must…

Businesses that have survived thus far should take some comfort from their survival skills. We now have 18 months of hands-on experience to guide us as we contemplate what is to come.

If Richi Sunak starts to claw back the borrowings he has created to fund the furlough and other COVID related schemes – and if inflation starts to climb – his ability to provide additional grants is unlikely. Which means we must proceed on the assumption that from autumn 2021 we are on our own.

If you have concerns about the course of action you should take from October 2021, please call, we can help you consider your options.

Government acknowledges HGV driver shortage

Tuesday, July 27th, 2021

In an open letter to the UK logistics sector, the Government has announced an urgent initiative to resolve the mounting shortage of lorry drivers in the UK.

Following Brexit and the COVID-19 pandemic, thousands of EU nationals – who make up a significant proportion of workers in the UK logistics industry – are having to return to home countries.

The letter outlined measures to boost Heavy Good Vehicle (HGV) driver recruitment and retention rates in the logistics industry.

 

Driving test changes

By altering provisional license entitlement and simplified and single driving tests, the Department of Transport aims to increase the amount of driving tests by 500 a week, and in doing so, streamline the process significantly.

 

Financial aid

Businesses are likely to also receive financial support regarding training, payment incentives and specialised apprenticeships to boost the supply of drivers to the industry.

In addition, the Department for Work and Pensions will be supporting prospective jobseekers to become HGV drivers by collaborating with the haulage sector on content for JobHelp, the Government’s virtual platform to advise and guide people looking for work.

 

Working conditions

The government is looking to improve working conditions to improve retention and encourage former lorry drivers back into the sector. By working with Highways England and other businesses, increased day and overnight facilities are to be created. These measures are in addition to a recent relaxation of drivers’ hours and supermarket delivery times. This was, however, met with criticism, as longer hours would likely result in tired drivers, increasing the risk of road accidents.

The chief executive to the RHA, in response, said: “This is a step in the right direction long-term, but it doesn’t address the critical short-term issues we’re facing.

“The problem is immediate, and we need to have access to drivers from overseas on short-term visas.”

Time to check Minimum Wage Rates?

Thursday, July 22nd, 2021

HM Revenue and Customs (HMRC) has issued a statement urging students and other summer workers to check that they are being paid the correct National Minimum Wage (NMW) rates.

In the 2020/21 tax year, HMRC helped over 150,000 workers across the UK to recover over £16 million remuneration that was due to them because incorrect NMW rates had been used.

Most workers should be paid the correct NMW and National Living Wage rates. This includes temporary seasonal staff on zero-hour and short-term contracts working in bars, hotels, shops and warehouses.

These workers have been reminded by HMRC that minimum wage rates are reviewed and updated at the end of every tax year. This could mean that many people could be underpaid by their employers who have not updated payroll systems with the current NMW rates.

Steve Timwell, Director of Individuals and Small Business Compliance at HMRC, said: “We want to ensure that seasonal workers and students are being paid what they are entitled to and, as the economy reopens, help employers if they are unsure of the rules.”

National Minimum Wage hourly rates from 1 April 2021:

  • £8.91 – age 23 or over (National Living Wage)
  • £8.36 – age 21 to 22
  • £6.56 – age 18 to 20
  • £4.62 – age under 18
  • £4.30 – apprentice

HMRC explains: The two most common causes of minimum wage underpayment are deductions and unpaid working time. For example:

  • Expenses for tools or equipment needed for the job.
  • Cost of uniform or clothing connected with the job.
  • Travelling time between work locations.
  • Training time.

Other reasons for underpayment can include employee tips not being included in their wages, and an employee moving to a higher rate per hour after a birthday.

Employers who pay workers less than their entitled amount must pay arrears of wages to the employee.

If your business needs help or advice, contact us today.

Claiming for work-related expenses

Tuesday, July 20th, 2021

The tax office is now open for claims from employees that have incurred work-related costs for the year to 5 April 2021 and have not been – and will not be – reimbursed by their employers.

How to make a claim – the DIY approach

You can claim online, by post or by phone.

This will involve completing application forms and you will need full details of money you have laid out in the tax year.

You can also claim for previous years within the permitted deadlines.

And if this process seems like too much trouble, we can help…

 

How much can you claim?

There are two choices. You can either gather all the receipts and other evidence to support your claim or you can claim HMRC’s flat rate allowances.

You will need to check that flat rate claims are available, but they generally cover expense claims for uniforms, work clothing and tools.

What can you claim for?

You can claim for:

  • Using your own vehicle for business mileage
  • Paying costs for using a company vehicle
  • Hotel and meal expenses
  • Use of your own home (providing a home office workspace for example)
  • Uniforms, work clothing and tools

In fact, if your employer has asked you to pay for any costs associated with your work for that employer, you should be able to make a claim if you have not been reimbursed.

 

We can help.

If you are unsure how to work out what you can claim for or how to make a claim we can help. Please call so we can discuss your options.

Is inflation something to be concerned about?

Thursday, July 15th, 2021

Inflation is a measure of how much the value of currency depreciates each year. For example, if prices for a loaf of bread rise by 3% in a year, you would have to earn that extra 3% to continue to purchase bread, so your extra earnings would have no extra value.

According to the Bank of England, average price inflation rose by an average of 5.2% a year between 1950 and 2020. £10 in your purse or wallet in 1950 would now need to be £350.42 to have the same purchasing power.

The process is pernicious. As prices increase there is a tendency to try and buy now before prices increase. This increase in demand can further outstrip supply and push up prices even more.

The reverse applies if prices fall; this is known as deflation. There is a tendency to defer buying decisions in the hope that prices will fall further. This is a disaster for businesses as they must lower prices to win sales, become unprofitable, and if the process continues, become insolvent and forced to liquidate.

While earning keep pace with inflation the increasing number of £s in your pocket will help you maintain your purchasing power, but the increased earning will not allow you to buy more stuff.

If inflation outstrips earnings, then you will have less purchasing power.

Inflation is a recent phenomenon. Between the seven hundred years 1200 and 1900, average inflation was low, only 0.4% per annum. In the next one hundred years, as the effects of industrialisation and increases in money supply took effect, average inflation was 4.4%.

If the Bank of England manages to keep inflation at the target rate of 2%, we should suffer no ill effects. The danger is if rates climb above 2% the BOE may need to increase interest rates – their prime instrument for reducing inflation – which means that we will all have to pay more to borrow money or finance our debts.