P2P – Peer to Peer Lending – is it the solution for lenders and borrowers? 5

Peer to peer lending is a simple transaction between an individual that wants to lend money and an individual or business that wants to borrow money without the use of a third party facilitator, like a bank or a lending company, to manage the loan.  It started in the USA in 2006 with Prosper.

Peer to peer lending is becoming more popular as banks limit lending and consumers find themselves facing difficulty obtaining traditional financing.  Banks, trying to fix their balance sheets, have introduced much more stringent requirements for personal loans than what was required in the past and fewer people have the qualifications to obtain these loans.  Small business owners have been hurt by the contraction in lending as well.  The reduction in traditional lending to small businesses has resulted in a dramatic increase in the number of business owners interested in obtaining peer to peer loans.

http://www.peertopeerlending.co/

Sounds brilliant but the problem has been that the potential borrowers turn to P2P after they have failed to borrow from other sources and this can make the borrowers high risk.

If this issue could be over come and P2P could become mainstream, I think it could become very popular, the lenders get a good return and the borrowers get a fair interest rate and terms. Even one is a winner.

To see how it works in practice take a look at http://www.fundingcircle.com/

Also here is blog http://stevegrice.wordpress.com/2012/01/30/peer-to-peer-business-lending-in-the-uk/ which is very interesting.

It would be great to find out your views and comments.

steve@bicknells.net

 

Its too expensive to become a limited company, isn’t it??? 2

I have often heard sole traders say that it will cost too much to become a limited company.

This is because many sole traders prepare their own accounts and do their own self assessment returns, but the reality is that for a basic business, just like a basic sole trader it could be done on a shoe string.

Lets look at the costs:

Company Formation this could cost as little as £16.99 by using a formation agent such as http://www.company-wizard.co.uk/

Accounting Software – TAS Books Basic is Free http://www.tassoftware.co.uk/products/tas_accounts_software/basics.html

Payroll – HMRC software is Free https://stevejbicknell.wordpress.com/2011/09/17/free-payroll-with-free-updates/

Statutory Accounts – Free webfiling at http://www.companieshouse.gov.uk – the annual return only costs £14 if filed online

Corporation Tax Returns – Free software from HMRC https://stevejbicknell.wordpress.com/2011/09/08/corporation-tax-online-its-free-its-ixbrl-complaint-and-you-can-file-accounts-too/

I appreciate that there will be things that you might need help with, just as a sole trader would, but it doesn’t have to be expensive to be a company and small companies pay 20% Corporation tax compared to sole trader paying 20% tax and 8% NI on profits.

It is worth stressing that if you need help always seek professional advice, mistakes can be costly, but if as a sole trader you were happy to prepare your own accounts why would you not be capable of preparing company accounts?

steve@bicknells.net

 

 

HMRC get tough on Travel and Subsistence 4

Many employees claim travel and mileage expenses:

Travel expenses that qualify for relief

You can get tax relief on the necessary costs of business travel like:

  • business mileage allowances for cars, cycles, motorcycles
  • public transport fares
  • hotel accommodation
  • meals
  • tolls
  • congestion charges
  • parking fees
  • business phone calls, fax or photocopying costs

But you can’t get tax relief for things that aren’t directly related to the business journey – like your newspaper or private phone calls.

Even if your employer doesn’t pay you the expenses you can still claim tax relief

https://stevejbicknell.wordpress.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

https://stevejbicknell.wordpress.com/2011/12/19/tax-refund-for-business-mileage/

Temporary Workplaces and Working from Home

The HMRC rules are set out at http://www.hmrc.gov.uk/manuals/eimanual/eim32000.htm

There is a 24 month rule for a temporary workplace and examples of working from home, these situations are common to Construction Workers, Agency Staff, Consultants, Drivers and Owner Managed Businesses where their home is their office.

Most people have been quick to assume that all their mileage from leaving home is business mileage and they feel entitled to claim for drinks and meals whilst working away from home, many businesses even agreed dispensations for meals of £5 to £10 with HMRC so they didn’t need receipts.

Some organisations tried to use Salary Sacrifice to swap salary for expenses to reduce PAYE/NI.

HMRC v’s REED

Specialist recruiter Reed has spoken of its ‘extreme disappointment’ after losing a £158million battle with the taxman over footing the travel and subsistence bills of temporary job candidates.

Dished out by the staffing company’s agents to 500,000 temporary workers between 1998 and 2006, the daily payments covered lunch – up to £6, and commuting – up to £11.45.

They were meant to be part of a salary sacrifice arrangement – where temps forego some of their salary for such perks, but it has emerged that no real agreement was in place for the six 12-month periods to 2006.

This is because HM Revenue & Customs has successfully argued that the employed temps were engaged under a series of job-by-job contracts and not, as Reed says, under a contract that continued (as an employment contract) following the end of an assignment.

http://www.contractoruk.com/news/0010392hmrc_defeats_reed_158m_temps_tax_case.html

It’s not just REED

Take a look at this Blog on Accounting Web http://www.accountingweb.co.uk/anyanswers/self-employment-travel-and-subsistence-issue-compliance-office

This Blog is about a construction worker working 200 miles from home and claiming travel, accommodation and subsistence. HMRC are seeking to disallow these expenses.

Do you have any advice or comments to share?

Has your business been affected by this issue? What happened? What were circumstances? How did you ensure compliance with HMRC rules?

 

steve@bicknells.net

The hidden capital allowances in your building 4

FA2008 introduced a new classification of integral features of a building or structure, expenditure on the provision or replacement of which qualifies for WDAs at the 10% special rate. The new classification applies to qualifying expenditure incurred on or after 1 April 2008 (CT) or 6 April 2008 (IT).

http://www.hmrc.gov.uk/manuals/camanual/CA22300.htm

The new rules on integral features apply where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature for the purposes of that qualifying activity. Each of the following is an integral feature of a building or structure –

  1. an electrical system (including a lighting system),
  2. a cold water system,
  3. a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
  4. a lift, an escalator or a moving walkway,
  5. external solar shading

Only assets that are on the list are integral features for PMA purposes; if an asset is not one of those included in the list, the integral features rules are not in point.

However, Plant and Machinery includes….

other building fixtures, such as shop fittings, kitchen and bathroom fittings

Many businesses have never claimed capital allowances for these items and I found this article by Steve Bone http://www.curtisplumstone.com/wp-content/uploads/2011/06/Election-Agreements-Steven-Bone.pdf

It explains how elections can be made to claim the allowances using S198 of the Capital Allowances Act 2001.

HMRC have further details on this link http://www.hmrc.gov.uk/manuals/camanual/ca26850.htm

The alternative is to agree a S562 ‘Just and Reasonable Apportionment’ of the sale price.

Elections need to be made within 2 years.

There are calculators on the internet to help you assess the potential value of your claim

http://www.portaltaxclaims.com/

http://www.cataxsolutions.com/calculator.html

steve@bicknells.net

The tax advantages of company vans Reply

What is a company van?

The Inland Revenue define this as a vehicle provided by an employer, built primarily to carry goods or other loads, and with a ‘design weight’ of up to 3,500 kilograms. This definition allowed drivers of pickups with car-like levels of luxury to avoid the much heftier levels of company car tax. Dual purpose vehicles have more than one row of seats but must be able to carry a 1 tonne payload to fall within van tax rules.Beware of specifying too many options such as a heavy hardtop which could take the payload below 1000kg.

Motorhomes and minibuses are not designed to carry goods, so will be taxed as company cars, not vans.

http://www.comcar.co.uk/newcar/companycar/budget/vantax.cfm

Benefit In Kind Tax

2011/12 Van benefit is a flat rate of £3000

2011/12 Van fuel benefit is a flat rate of £550

This is normally much cheaper than the benefit in kind on cars, try these calculators and compare the difference in tax.

Car Tax Calculator http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

Van Tax Calculator http://www.vantax.co.uk/newcar/companycar/vancalc/g1select.cfm?clk=3

If your private use is insignificant then there is no benefit in kind.

‘Insignificant’ other private use means that the employee’s private use of the van in addition to ordinary commuting is very much an exception to normal usage and only lasts for short periods on an occasional and irregular basis. For example:

  • making a slight detour to buy a newspaper on the way to work counts as insignificant private use
  • an employee using a van to do their weekly shopping counts as more than insignificant private use – see the next section for the rules that apply in this case

http://www.hmrc.gov.uk/paye/exb/a-z/v/vans.htm#1

Capital Allowances and Annual Investment Allowance (AIA)

You can claim capital allowances on Vans as Plant & Machinery and they aren’t subject to the same restrictions as Cars, so if you are planning to buy a van now would be a good time as the Capital Allowances are higher before April 2012.

From April 2012 the rates of capital allowances will be reduced from (a) 20% to 18% and from on the Main Rate Pool (b) 10% to 8% for  ‘special rate’ expenditure respectively. At the same time the maximum amount of the Annual Investment Allowances (AIA) will be reduced to £25,000 a year (currently £100,000). So you might want to consider buying assets prior to April 2012 to take advantage of the current rates.

steve@bicknells.net

Tax Year End is coming – are you ready? Reply

Not long to go now, the 5th April 2012 will be here before you know it.

So what should you do to makesure you save as much tax as possible?

Here are my top tips:

Companies & Businesses

From April 2012 the rates of capital allowances will be reduced from (a) 20% to 18% and from on the Main Rate Pool (b) 10% to 8% for  ‘special rate’ expenditure respectively. At the same time the maximum amount of the Annual Investment Allowances (AIA) will be reduced to £25,000 a year (currently £100,000). So you might want to consider buying assets prior to April 2012 to take advantage of the current rates.

Individuals – use your tax allowances

ISA’s – the current limit is £10,680 of which £5,340 can be in a cash ISA

Pensions – tax relief on pension contributions upto £50,000

Tax Check – check to see if you have paid too much tax and claim a refund if you have https://stevejbicknell.wordpress.com/2012/01/21/is-your-tax-code-right/

Tax rates and Thresholds for 2012/13

HM Treasury have summaries these for you http://cdn.hm-treasury.gov.uk/as2011_rates_and_thresholds_201213.pdf

Do you have any ideas to share?

steve@bicknells.net

Company Car or Car Allowances, which is best, there’s only one way to find out…. 7

Let’s take an example:

VW Golf Blue Motion 1.6 TDI 105PS £18,860 Diesel CO2 99g/km

http://www.volkswagen.co.uk/#/new/golf-vi/which-model/engines/overview/

Using the HMRC calculator http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

Tax Liability indicator:                                     20%                        40%

Company Car Tax (2012/2013)                    £490.20                £980.40

Company Car Fuel Tax (2012/2013)          £488.80                 £977.60

Total                                                                        £979.00                  £1,958.00

If you (the employee) pay for your private fuel you won’t have to pay tax on it.

 

The Employer will need to pay Class 1A National Insurance on the benefit in kind

Car benefit charge (2012/2013)                  £2,451.00

Car fuel benefit charge (2012/2013)         £2,444.00

Total                                                                         £4,895.00

Class 1A 13.8%                                                       £675.51

In addition the employer will have to fund the purchase of the car based on this link the interest will be at 4.5% http://www.volkswagen.co.uk/#/new/golf-vi/which-model/compare/483/ over 36 months that’s a cost of around £3,572.30 in total

Assuming the car is purchased rather than just hired, to offset Depreciation your employer can claim Capital Allowances based on CO2 emissions:

CO2 emissions

Capital allowances treatment of expenditure

Over 160 grams per kilometre (g/km)

Goes into the special rate pool and qualifies for writing-down allowances at the rate for the special rate pool, currently 10 per cent per annum.

 

160g/km or less but more than 110g/km

Goes into the main pool and qualifies for writing-down allowances at the rate for the main pool, currently 20 per cent.

 

110g/km or less (but note that the first-year allowance for cars in this category is due to expire in 2013)

You can claim up to 100 per cent allowance in the accounting period when they were bought, the balance (which may be nil) goes into the main pool in the next year.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1086394511&type=RESOURCES

So in our case the CO2 emissions are 99 g/km so 100% allowances apply, but subject to a balancing charge on disposal.

So what if your employer offered you a car allowance of £300/mth and business mileage at approved mileage rates http://www.hmrc.gov.uk/rates/travel.htm

If you were a 20% tax payer you would pay tax (20%) and NI (12%) on the extra income so net, your car allowance would be £204/mth x 12 = £2,448

 

Assuming you do 10,000 business miles that’s worth £375/mth x 12 = £4,500 (note that the mileage rate drops to 25p after 10,000 miles)

 

Less the cost of Fuel using HMRC rates http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

Is 12p per mile so the cost is £100/mth or £1,200 per year

 

So overall from the employees perspective, using this example (ignoring private mileage), Net Allowance £204 plus Mileage £375 less Fuel £100 = £479 per month the cost of the Blue Motion is £320.94 a month per VW Finance (excluding the £1,886 deposit), so the allowance is a good option.

The employers NI at 13.8% on the car allowance is £300 x 13.8% x 12 = £496.80 so that’s cheaper the the Class 1A of £675.51

However, the employer losses the Capital Allowances and the Diesel would be cheaper if the employer purchased it.

Other points to be aware of are:

VAT http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm#6

H&S http://www.hse.gov.uk/pubns/indg382.pdf

It is also possible with the right advice to create a salary sacrifice scheme relating to car leasing, advisors such as Dave Hedges at http://www.edge-tax.com are experienced in these schemes.

In conclusion, in my opinion, it all depends on how much the allowance is (Car and Fuel)  and what car the employee needs (size and mileage), the only way to work out the best solution is by running the calculations to find out.

steve@bicknells.net