Good news, the exemption threshold for employment-related loans has been increased for 2014/15 from £5,000 to £10,000, as long as the balance is below this level there is no tax charge for employees or employers.
But there could be bad news for participators (Directors/Shareholders) who have been using one of these techniques to avoid the 25% temporary Corporation Tax charge:
1. Using a Partnership or LLP where the company is a partner or member as a way to get loans
2. Making arrangements that did not qualify as loans but the where value ended up in the hands on a participator
3. Making loans repaying them within 9 months and getting a new loan, the Bed and Breakfast approach
4. Transfers of assets
5. Loans channelled through third parties
New anti avoidance rules are coming, a consultation paper is planned for later this year aimed at minimising the scope for abuse and there will be new legislation in the Finance Bill 2014 and Finance Bill 2015.
£30 million will be made available over two years. This will address a gap in the market for providing external business advice such as making a successful loan application to a bank or taking on an employee.
Back in September 2012 the British Chambers of Commerce were asking for £100m in vouchers of £5,000 per Business, open to up to 20,000 small and medium-sized businesses, but £30m is good start.
To test the approach, “a new marketplace for external business advice” will be created.
Advice could be focused on the following areas:
Legal, HR, accounting advice: As businesses expand, accounting and HR systems become more complex, and small businesses in particular can struggle to make sense of employment law and tax systems. Advice would help businesses understand these complex functions, allowing them to be more efficient, and focus on growth.
Access to finance advice: Smaller, younger, and high-growth businesses often have more difficulty accessing finance than more established firms, and some are unaware of the options available outside traditional debt finance. Advice could also address the problem of discouraged demand, and may result in more businesses obtaining finance to boost investment plans.
Marketing advice and training: Helping businesses with marketing their products and services here and importantly in overseas markets could lead to more sales, and growth opportunities for many firms.
Planning support: The complexity of the planning system means many businesses need to hire in external consultants at a high cost. The costs will often put firms off expansion, so offering companies free advice would help motivate businesses to grow and expand their premises.
Staff training: Workforce skills consistently rank among the top three concerns among Chamber members across the country. As businesses expand and develop their goods and services, increased staff training is often needed to help firms grow.
Export advice: Urgent action is needed to support the UK’s potential and current exporters to help rebalance the UK economy towards exports. Many businesses do not have the advice or skills they need to break into new markets. Export training and access to market intelligence and trade shows and missions, could help many businesses take the first step to exporting, and open new markets for current exporters.
The personal allowance for under-65s will rise by £560 to £10,000 in 2014/15.
Housing
From 1 April, the Help-to-Buy scheme will give people who have a 5% deposit a 20% interest-free loan on homes worth up to £600,000. The qualifying period for people looking to purchase their home under the Right-to-Buy scheme has gone down to three years.
Childcare
Working families will benefit from a 20% tax relief on childcare costs, offering an annual saving of £1,200 per child under 12. The scheme will be phased in from autumn 2015.
An additional £200 million will be provided to increase childcare support in Universal Credit, with the commitment being introduced from April 2016.
Corporation Tax
Corporation tax will be reduced by a 1% to 20% in April 2015.
Employers National Insurance
Employers’ national insurance payments will be cut by £2,000 from April 2014
To take advance of the allowance, firms will simply have to inform HM Revenue & Customs, and the Treasury says it will be “delivered through standard payroll software”.
Mr Osborne added: “For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed.”
“They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax.”
450,000 small firms will pay no employer National Insurance.
So who are the overall winners and losers – overall we are losers!
Based on Treasury analysis, the middle income families have done better than the bottom quartile and top quartile, but overall we are all worse off (based on all households).
The Economy and Borrowing are in worse shape than previously predicted
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility (OBR) watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.
The OBR predicts borrowing of £121bn this year, the same as last year, and £120bn for 2014-5
George Osborne says borrowing as a share of GDP will fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17
Its probably fair to say that most contractors who have an office at their home claim business mileage when they visit clients, but things could be about to change for the worse….
In what could become a landmark decision in the interpretation of “wholly and exclusively” allowable expenditure, a doctor has lost a protracted battle with HMRC over his business mileage claims.
After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.
However, the panel did not accept that the home office could be treated as the starting point for calculating private practice business mileage involving habitual journeys.
Potentially, the decision has wide implications for all professional self-employed activity, where the business owner undertakes substantive work at home, but also has another business base at which they deliver their expertise regularly.
No one enjoys paying out on insurance premiums but why not take advantage of a great “tax break” when it comes to providing life assurance for your family?
Most directors pay for family life assurance out of their “taxed” net income and therefore for example a £100 per month premium has really cost approximately £145 when you add back in the tax and N.I.
If you were to pay for this via a Relevant life Plan then your company can make the payments for you and its classed as a business expense therefore saving on Corporation Tax. In this instance the £100 per month would now have a real cost of £80 per month. More good news is that it’s NOT a P11d benefit and the policy is written into a special trust which means on death the proceed go straight into the trust (for the benefit of your family) and not back to the company.
Key Performance Indicators (KPI) are used by organisations to evaluate success and when you choose KPI’s you should follow the smart approach:
S pecific – a well defined goal that is clearly understood by everyone. M easurable – can you track your progress towards the goal? A greed – both employer and employee must agree on what the goals are. R ealistic – can you achieve the goal with the resources provided? T ime related – will there be enough time to complete the task?
Here are some examples of E Commerce KPI’s
Sales Key Performance Indicators:
Hourly, daily, weekly, monthly, quarterly, and annual sales
Average order size (sometimes called average market basket)
Average margin
Conversion rate
Shopping cart abandonment rate
New customer orders versus returning customer sales
Cost of goods sold
Total available market relative to a retailer’s share of market
Product affinity (which products are purchased together)
Product relationship (which products are viewed consecutively)
“RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year.”
If you have 9 employees or less you will be able to use Basic PAYE Tools to comply with RTI for larger business you will need to purchase a payroll system or use a bureau.
Basic PAYE Tools will:
record your employees’ details
handle mid-year tax code changes
work out and record your employee’s pay, tax, NICs and any Student Loan deductions every payday
generate the payroll data that you need to send to HMRC in real time, including starter and leaver information
produce an Employer payment record that works out how much you need to pay HMRC
contain integrated calculators to help you to work out statutory payments such as Statutory Sick Pay and Statutory Maternity Pay
transfer employee details from one year to the next so you don’t have to re-enter their details
Basic PAYE Tools does not provide a payslip so here is a template you can use.
A key feature of RTI is to link RTI data and payment information together where employees are paid by direct Bacs. This will reduce errors and improve accuracy, particularly when Universal Credits is introduced. Employers need to use employee bank details to generate the hash cross reference. HMRC appreciate that this may result in a change to business processes for some employers.
The payroll and payment will be linked with a hash created by your payroll solution which contains:
A four character random string which is inserted in field 7 of the Bacs payment record• The sort code of the originator’s bank (6 digits);• The sort code of the recipient’s bank (6 digits)• The amount of payment in pence (-Tax and NI) (11 digits).
This will be sent alongside the tax information to HMRC.
Currently the use of the Hash Cross Reference only applies if you use Direct Bacs
The High Street Banks have not enabled Hash Tags for online banking yet, although this may well change at a later date.
Transfer values from final-salary schemes are at an all-time high (because 20 year gilts have fallen to 3% whereas in 1990 they were 11%), in fact transfer values are 80% higher than 6 years ago according to Investors Chronicle and they give 6 reasons to leave final salary schemes:
You have other assets to fall back on
You have a scheme from an ex-employer and don’t trust your former employer to keep funding the scheme
You think you former employer is in trouble
Your pension will not be fully covered by the Pension Protection Fund if you former employer becomes insolvent (the cap at age 65 for 2012-13 is £34,000 annual income)
You are in bad health and won’t likely see an average length pension
You are happy not to ever buy an annuity and want more flexible benefits
At December 2012 the FTSE 100 companies had a combined deficit of over £50bn and only 13% of final salary pension are open to new joiners.
How transfer values have out grown scheme benefits
This example would be a for a typical final salary scheme paying 3% benefit increases to deferred pensioners over the last six years and are based on a member who was 50 in 2006.
The Financial Services Authority (FSA) are in general against transfers out of final salary schemes and on the 28th February 2013 issued proposals to change the basis of calculation for transfer values:
The FSA estimates that the changes to the way TVAs are performed will prevent an undervaluation of benefits of up to £20bn. In other words, the changes mean that transfer values may have to increase before an adviser recommends a transfer.
Transferring out should be done with extreme care as its irreversible.
Charities have Pension Deficits too
In the Financial Director Magazine in February 2013 it was reported that Baker Tilly had resigned as auditor to Citizens Advice Bureau over a disagreement on pensions.
Citizens Advice’s pension pot has a growing deficit, which leapt from £19.4m in 2006 to almost £36.5m by March 2010. The defined benefit scheme closed to new entrants in 2008.
The charity insists “it is not possible to separately identify assets and liabilities relating to Citizens Advice”. For this reason, it cannot make provision under FRS12.
However, Baker Tilly disagrees and last year gave a qualified opinion on the accounts, calling for a provision of £8,305,000 to be made at 31 March 2010.
