Should I worry about a tax investigation? Reply

Tax Investigations can happen to anyone, around 7% are estimated to be random.

Even if your accounts and tax affairs are in totally up to date and correct investigations will take up your accountants time and incur fees.

What can you do to reduce your chances of being selected:

1. File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return

2. Declare all your income – HMRC get details of bank interest and other sources of income, sometimes they test them and match them to returns

3. Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing

4. Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund

According to the FSB

The average duration of a full investigation is circa 16 months whereas an aspect investigation can last between 3 – 6 months, but can take longer.

We are currently putting in place a solution for our client with Taxwise  better to be safe than sorry, letters will be sent our clients before Christmas

taxwise

steve@bicknells.net

Will your Flat Rate VAT bill be going up in April? Reply

omg man

The Flat Rate VAT scheme is very popular with small businesses.

The Flat Rate Scheme is designed to simplify your records of sales and purchases. It allows you to apply a fixed flat-rate percentage to your gross turnover to arrive at the VAT due.

Fixed-rate percentages vary depending on the type of business. [HMRC VAT Notice 733]

The scheme is for businesses with a turnover no more than £150,000 a year, excluding VAT.

The problem is that HMRC feel the scheme has been abused and used as a way to pay less VAT especially by businesses with virtually no costs.

A Low or Limited Cost Trader would spend less than 2% on gross turnover, or less than £1000 on the purchase of goods.

From April 2017 they will get a special 16.5% flat rate.

Here are some of the businesses likely to be affected

  • Accountancy and legal services 14.5%
  • Journalism or entertaining 12.5%
  • Computer or IT consultancy 14.5%
  • Business services not listed elsewhere 12%
  • Estate agents and property management 12%
  • Management consultancy 14%

There are lots of other VAT schemes to choose from

Standard VAT Scheme – on this scheme the VAT is based on tax points from invoices

VAT Cash Accounting Scheme – if your turnover is below £1.35m you can account for VAT on a Cash basis, this is particularly helpful if your customers pay you on slower terms than you pay your suppliers

Annual Accounting Scheme for VAT – if your turnover is below £1.35m you could join the Annual Scheme and complete one return for the year but you make either 9 interim payments or 3 quarterly interim payments

Retail VAT Schemes – These are specific schemes aimed at mainly at shops and help to overcome the issues of mixed vat rate goods

VAT Margin Scheme – The margin scheme relates to second hand goods and accounts for VAT on the margin, for example on the sale of cars

They will all produce different answers!

Now might be a good time to make comparisons.

steve@bicknells.net

The Uber Employment Case Reply

Driver in front of taxi waiting for clients

Uber has always maintained that its drivers are self employed but the recent case

Aslam and others v Uber BV and others 2016

The case was brought under the Employment Rights Act 1996 and the drivers involved brought the case believing there were employees.

The employment tribunal hearing began on 20 July 2016.

On 28th October 2016 the BBC reported

Uber drivers have won the right to be classed as workers rather than self-employed.

The ruling by a London employment tribunal means drivers for the ride-hailing app will be entitled to holiday pay, paid rest breaks and the national minimum wage.

The GMB union described the decision as a “monumental victory” for some 40,000 drivers in England and Wales.

Uber said it would appeal against the ruling that it had acted unlawfully.

The San Francisco-based company had argued that its drivers were not employees but self-employed contractors.

steve@bicknells.net

Are you ready for the new £1 coin? Reply

The new coin will be the most secure coin in the world!

According to http://www.thenewpoundcoin.com/

The new coin has a number of features that make it much more difficult to counterfeit.

12-sided – its distinctive shape makes it instantly recognisable, even by touch.

Bimetallic – it is made of two metals. The outer ring is gold coloured (nickel-brass) and the inner ring is silver coloured (nickel-plated alloy).

Latent image – it has an image like a hologram that changes from a ‘£’ symbol to the number ‘1’ when the coin is seen from different angles.

Micro-lettering – it has very small lettering on the lower inside rim on both sides of the coin. One pound on the obverse “heads” side and the year of production on the reverse “tails” side, for example 2016 or 2017.

Milled edges – it has grooves on alternate sides.

Hidden high security feature – a high security feature is built into the coin to protect it from counterfeiting in the future.

Old metal coin slot panel from a coin operated machine

It comes out March 2017 but will your business be ready for it, think of all the parking meters and other machines that will need to but reconfigured to accept it!

steve@bicknells.net

Autumn Statement 2016 Reply

fictitious newspapers

Phillip Hammond gave his first Autumn Statement on 23rd November 2016

As expected Brexit is forecast to reduce growth and borrowing will be higher.

But let’s focus on the Business related key points:

Employment

  • National Living Wage increasing to £7.50 from £7.20 in April 2017
  • Personal Allowances will increase to £11,500 in April and to £12,500 by the end of the Parliament
  • The Higher Rate Threshold will increase to £50,000 by the end of this Parliament
  • Salary Sacrifice is to be restricted to Childcare, Cycle to Work and Ultra-low Emmission Cars
  • Employee Share Scheme lose their income tax relief and capital gains tax exemption
  • New rules will take effect in April 2017 regarding Assets made available without transfer of ownership
  • From April 2018 termination payments could be subject to employers NIC

Corporation Tax

  • Corporation tax rates are reducing
    • Financial year 2017 19%
    • Financial year 2018 19%
    • Financial year 2019 19%
    • Financial year 2020 17%
  • From April 2017 new rules will create a restriction meaning that losses of up to 50% of profits can be offset with a £5m allowance per company
  • From April 2017 corporation tax relief for interest will be restricted where the interest is over £2m

VAT & Insurance Premium Tax

  • Insurance Premium Tax is going up to 12% in June 2017
  • A new 16.5% Flat Rate will be applied to businesses in the Flat Rate Scheme with limited expenses such as Labour Only Contractors, the new rate starts in April 2017

Tax Avoidance

  • Changes to the Flat Rate Scheme should generate £695m by 2021/22
  • The Government will push ahead with the introduction of a new penalty for a person who enables another person or business to use a tax avoidance scheme that is defeated by HMRC
  • HMRC will increase the number of court cases

Property

  • The introduction of £1,000 property income allowance from April 2017
  • Letting Agents will no longer be able to charge renters fees

steve@bicknells.net

Should Income Tax and National Insurance be merged? Reply

Pay Packet And Banknotes

On the 14th November 2016 published Closer alignment of income tax and national insurance: a further review

ni-and-tax

The Office of Tax Simplification (OTS) are therefore recommending that government make changes to make NI more like PAYE.

This isn’t a new idea, its been kicked around since 1943! and George Osborn said it was good idea in his last budget

Will it get a mention in tomorrows Autumn Statement?

steve@bicknells.net

 

Do we need lookthrough taxation? NO Reply

the mirror

This month (November 2016) the Office of Tax Simplification published their Final Report on Lookthrough Taxation.

The proposal was that for Small Companies instead of charging the company tax (corporation tax), tax (income tax and national insurance) would be charged directly on the stakeholders based on their share of the profits. The end result being that Small Companies are treated in the same way as Sole Traders.

Back in July the OTS asked this key question Overall would lookthrough deliver simplification? and the answer was NO

Many suggested that it would discourage entrepreneurs and reduce funds retained in the business.

There are also complications such as Directors Loan Accounts and Salaries (including to family members).

Introducing lookthrough tax would have meant shareholders would be subject to Income Tax and Class 4 NI on company profits.

This could be the for runner to a longer study comparing Employees to Sole Traders to Companies.

For now common sense has prevailed.

The OTS report states Our conclusion is that lookthrough does not offer sufficient simplification to justify its introduction. On balance we feel that it would be more complicated than the current tax system, given the additional rules that would be needed

steve@bicknells.net

 

 

Are you stressed about Black Friday and Cyber Monday? Reply

Surprised OMG shocked woman

Christmas is coming, its time to buy presents and that means Black Friday (Friday 25th November 2016) and Cyber Monday (Monday 28th November 2016).

It’s a frenzy of present buying!

Last year UK shoppers spent £3.3 billion between Black Friday and Cyber Monday, Amazon reported selling 7.4 million items on Black Friday 2015 and £968 million was spent on Cyber Monday.

black-friday

In 2005, Shop.org coined the term “Cyber Monday” after analyzing increased Internet traffic and sales on the first day that most people return to work after the holiday weekend.

Since its inception, online consumers have started to spread the word about Cyber Monday. Between 2006 and 2011, online sales doubled to over 1.2 billion dollars on Cyber Monday. The success of Cyber Monday has made itself known all around the world, including Canada, the United Kingdom, and all over Europe.

Are you ready to spend spend spend! buy buy buy!

steve@bicknells.net

Does LISA take your fancy? Reply

fotolia_121789142_xs-lisa

Actually, this isn’t a blog about the Mona Lisa its actually about Lifetime Investment Savings Accounts (LISA).

LISA’s are available from April 2017 and are a retirement saving option.

  • Save up to £4000 per year
  • You must be aged between 18 and 40
  • Anything paid in will be topped up by 25% at the age of 50
  • Over the age of 60 you can take out all the money tax free
  • If you take it before 60 you lose the 25% bonus and get a 5% charge

lisa

Personally, I don’t think they sound great, if you want to save for retirement why not just save in a pension?

If you want to save in a bank why not just use the Personal Savings Allowance which started in April 2016.

The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.

Its expected that 95% of savings will no longer be taxed.

Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.

steve@bicknells.net