Are your businesses really separate for VAT purposes? 1

Stress business woman

HMRC have been updating their manuals (21/10/13).

The purpose of VATDSAG01050 Single Entity and Disaggregation Manual is to help you to determine

  • whether two (or more) apparently separate businesses are, in reality, a single entity
  • whether, where two (or more) separate entities exist, they have been separated artificially.

Schedule 1,1A (2) of the VAT Act 1994 requires that, in determining whether any separation is artificial, due regard is had to the extent to which the different persons concerned are closely bound to one another by

  • financial
  • economic, and
  • organisational links.

Schedule 1, 2(2) of the VAT Act 1994 lays down three conditions which must be met before we can issue a Notice of Direction to any person. These are:

  • he is making or has made taxable supplies
  • those taxable supplies form part of wider activities carried on concurrently or previously (or both) with one or more other persons
  • the totality of the disaggregated activities gives rise to a liability to be VAT registered.

Here is a link to the updates http://www.hmrc.gov.uk/manuals/vatdsagmanual/index.htm

HMRC have some interesting cases, here is an example:

The case of Stephen and Angela Trippitt (MAN/00/0249) VTD 17340 addressed the question of whether a husband and wife could operate two businesses from the same premises.

In this case, the Tribunal decided that

  • the traders had successfully separated the activities of public house and bed and breakfast into two separate entities
  • we were incorrect in issuing a Notice of Direction.

The facts showed the extent of the commercial relationship between the entities, in addition to which Mrs Trippitt gave 35% of her takings to her husband.

The Tribunal was satisfied that this amount constituted a realistic, commercial, arm’s length contribution towards the value of the shared premises and telephone and utilities.

This decision means that where one entity argues that it pays a fixed percentage of its takings to the other, you need to establish:

  • what would happen if there were no takings?
  • would a minimal amount still have to be paid?
  • if not, how does that entity see these arrangements as constituting a normal commercial relationship, given that it is at no financial risk?
  • is there a real monetary transaction (as opposed to just the appearance of one in the books)? Can they provide evidence of this?

For more cases follow this link http://www.hmrc.gov.uk/manuals/vatdsagmanual/VATDSAG08100.htm

steve@bicknells.net

7 things to check if you get a P800 Tax Calculation Letter 5

with computer

HM Revenue & Customs (HMRC) has started the annual automated End of Year Reconciliation process to check whether customers in PAYE (Pay As You Earn) have paid the right amount of tax in 2012-13.

Most people – around 85 per cent of those in PAYE – will have paid the right amount of tax for the year so won’t receive any contact from HMRC. If you have paid too little or too much tax under PAYE for 2012-13, HMRC will automatically send a tax calculation (on form P800) to you showing the details along with notes explaining what it means. It’s expected that this automated process will be completed by October 2013, and there is no need to contact HMRC.

If you have:

  • Paid too much tax, you will be sent a cheque, in most cases, within 14 working days from the receipt of a P800 Tax Calculation.
  • Paid too little tax, the underpayment will in most cases be automatically collected through your 2014-15 annual tax code over 12 months. Where this is not possible, HMRC will write to you and let you know what options are available to pay the tax outstanding.

Millions of P800 calculations will be sent out!

The P800’s are likely to contain errors because:

  1. Large amounts of data are manually input
  2. Estimates especially for Bank Interest and Investment Income

So check the following carefully:

  1. P60 – you get this at the end of each tax year
  2. P45 – you get this when you leave a job
  3. PAYE Coding Notice
  4. P11D Expenses and benefits
  5. P9D Expenses payments and income from which tax cannot be deducted
  6. Bank and Building society statements
  7. Pension Tax Deductions

Its expected that around 3 million people will be asked to pay more tax and around 2 million people will have overpaid.

Here is a link to the HMRC Helpsheet on understanding your P800

steve@bicknells.net

10 tax allowances we fail to claim Reply

Tax Money

In 2012 Unbiased.co.uk reported that £12.6 billion was unclaimed by UK tax payers, here is a list with some ideas:

  1. Income Related Tax Credits – Check and find out what you are entitled to – UK Benefits https://www.gov.uk/benefits-adviser
  2. Tax Relief on Pension Contributions – There are estimated to be over 4 million people not paying into a pension, auto enrolment should help to change that, this blogs explains the tax advantages https://stevejbicknell.com/2012/05/02/why-invest-in-a-pension-because-of-tax-relief/
  3. Tax Relief on Charity Donations – Are you using Gift Aid? are you a higher rate tax payer entitled to additional relief?
  4. Saving on Inheritance Tax – Many people don’t have a Will let alone any IHT planning!
  5. Making Use of ISA’s – Why get taxed on the interest on your savings if you could have an ISA? Its easy to get an ISA and you can still have access to your ISA savings if you need it, the current ISA allowance is £11,520 or £5,760 for cash ISA’s
  6. Child Benefit – Use the benefits adviser to check if you can claim – UK Benefits https://www.gov.uk/benefits-adviser
  7. Avoiding tax penalties and late filing – This just requires you to be organised, make sure you know the filing dates http://www.hmrc.gov.uk/sa/deadlines-penalties.htm and get the information needed in plenty of time
  8. Savings on Capital Gains – The current allowance for 2013/14 is £10,900 (previously £10,600) for an individual many people seem to forget they have this allowance
  9. Making Use of Employee Share Schemes – The government love employees to have shares and this year introduced a new share ownership option https://stevejbicknell.com/2013/08/03/employee-shareholders-will-your-employees-want-shares/
  10. Income Tax and Personal Allowances – Consider who should own assets (and get income from those investments)  – you or your spouse – so that you can minimise your tax liability

Steve@bicknells.net

 

Grow Online, Expand Worldwide – initiative to help SME’s 1

e commerce

The government wants to make the UK the best place to start and grow a business. In the autumn it will launch a public campaign to celebrate GREAT British business success stories. The government wants to inspire other small businesses and point them towards the support that can help them grow. It will also launch a new strategy for how the whole of government will back them. This will set out a range of measures to continue helping budding entrepreneurs and existing businesses succeed.

If you are a business interested in the ‘Grow Online, Expand Worldwide’ campaign, please call 02070344848 and speak to a member of the Click:Connect:Sell team.

Just 33% of small to medium-sized companies have a digital presence and only 14% sell their products online. But research suggests that if UK SMEs fully adopted online technologies, they could increase annual turnover by £18.8 billion. Here in the UK we’re twice as likely as the OECD average to buy goods online.

UKTI’s ‘Grow Online, Expand Worldwide’ campaign includes local support for:

  • 4,000 aspiring web exporters through awareness raising sessions, a webinar campaign and international web workshops.
  • 1,200 web export ready businesses through e-commerce masterclasses.
  • 1,500 web exporters with bespoke one-to-one advice from experts, tailored website reviews and action planning to access web exporter vouchers – up to £3,000 matched funding.
  • 600 companies from the UK retail sector to sell online by helping them to list their products on the world’s leading online sales sites including Alibaba in China and Tejuri in the Gulf.

steve@bicknells.net

20 businesses you can run from home 3

fotolia_491138_s.jpg

It’s nearly Christmas and that puts a strain on most peoples cash, so you might well be looking for ways to earn extra cash, here are my top 20 home based business ideas:

  1. Get a lodger – Under rent-a-room a taxpayer can be exempt from Income Tax on profits from furnished accommodation in their only or main home if the gross receipts they get (that is, before expenses) are £4,250 or less
  2. Ironing and Laundry Services – Always popular and you can start with friends and family
  3. E Bay Trading – as E Bay say… The first task is to sort through those bulging drawers and messy cupboards, finding stuff to flog. Get a big eBay box to stash your wares in, and systematically clear out wardrobes, DVD and CD piles, the loft and garage. Use the easy 12-month rule of thumb to help you decide what to offload: Haven’t used it for a year? Flog it.
  4. Blogging – Blogging has taken off and many businesses are looking for people to write blogs for them
  5. Candle Making – You can sell the candles on line and its easy to buy the wax and things you need to make the candles
  6. Car Boot Sale – As with E Bay but without going on line
  7. Cake Making – Make sure everything is labelled correctly and you comply with Health & Safety issues
  8. Data Entry – The internet makes it easy to enter data from where ever you are
  9. Social Media – Similar to blogging, businesses need help to manage Twitter, Facebook and Linked In
  10. Website Design – If you have the expertise, go for it
  11. Sales Parties –  Cosmetics to Ann Summers, there is a long list of opportunities
  12. Sewing and Clothes Alterations – Perfect before and after Christmas
  13. Jewellery – Making and selling jewellery is always popular and great for Christmas presents
  14. Car Repairs – Assuming you have the skills needed and comply with legal requirements
  15. Pet Care – Walking dogs or grooming is popular
  16. Virtual Assistant – Also personal organiser or personal shopper
  17. Wedding Planner – You could start by creating a blog about your expertise
  18. Direct Sales – For example Utility Warehouse
  19. Computer Repair – Great provided you have the skills
  20. Marketing – Telesales to leaflet design and freelance writing

steve@bicknells.net

10 creative ways to cut your overheads 3

Businessman struggling with large Expenses

Making a profit and generating cash is vital to all businesses and a key way to improve profit is to reduce overheads, here are a few ideas:

  1. Re-think your office/premises requirements – Premises are big cost for most businesses, could you operate in a smaller space and sub-let part of your offices? could you work from home?
  2. Telecommute – Technology effectively reduces distance, so there is no need to require administrative people or specialists to be physically located together. Use VOIP, Skype and Video Conferencing.
  3. Cars – Company Cars can be expensive, time consuming to manage and emotive, why not consider car allowances
  4. Staff – Generally the biggest overhead is people, consider outsourcing rather than having the fixed overhead of in house staff
  5. Shop around – Are you getting the best deals on Stationery, Printing, Insurance, Light & Heat…..
  6. Students – Students, apprentices and interns are eager to learn and will be less expensive then experienced employees
  7. Refinance Debt – Could you reduce the cost of borrowing? could you borrow from your Self Invested Pension Plan?
  8. Paper –  Sorting, filing, and finding files requires time and space. Purchase a scanner and scan all important papers and keep them in well organised electronic files to save space and administrative costs.
  9. Go Green – Reducing waste and saving energy will save money too
  10. Buy Second Hand – Second hand office furniture is plentiful and its cheaper than buying new

steve@bicknells.net

How to carry forward unused pension allowances 5

Taking money

If your total pension savings for the tax year are more than the annual allowance you can carry forward any unused allowance from the previous three years to the current tax year. You only have to pay tax on any amount of pension savings in excess of the total of:

  • the annual allowance for the tax year
  • any unused annual allowance you carry forward from the previous three years 

You can only carry forward unused annual allowance if during the tax year you were in either:

  • a registered pension scheme
  • an overseas pension scheme and either you or your employer qualified for UK tax relief on pension savings in that scheme

There’s a strict order in which you use up your annual allowance. First you use the annual allowance from the current tax year followed by any unused annual allowance from the previous three tax years, using the earliest tax year first.

There are special rules when carrying forward annual allowance for tax years 2008-09 to 2010-11. You should calculate the amount of available annual allowance using an annual allowance rate of £50,000 and using the current method of valuing your pension savings amount- more in the link below.

Example

Sam made total pension savings of £80,000 in 2012-13. Sam has been a member of a pension scheme since June 2010. His pension savings for the previous three years are as follows:

2009-10: £0 – he wasn’t a member of a pension scheme

2010-11: £30,000

2011-12: £0 – although he was a member of a pension scheme

Sam can carry forward £70,000 unused annual allowance to 2012-13 calculated as:

2009-10: £0 – because he wasn’t a member of a pension scheme

2010-11: £20,000

2011-12: £50,000

Even though Sam didn’t make any pension savings in 2011-12 he did belong to a pension scheme so he can carry forward all of his unused annual allowance.

The annual allowance for 2012-13 (£50,000) plus the carried forward annual allowance (£70,000) is £120,000.

Sam doesn’t have any tax to pay on his pension savings of £80,000 for 2012-13 as it’s less than the total annual allowance available of £120,000. He also has £40,000 unused annual allowance (from 2011-12) to carry forward to 2013-14.

Tax Year

Annual Allowance

2006/07

£215,000

2007/08

£225,000

2008/09

£235,000

2009/10

£245,000

2010/11

£255,000

2011/12

£50,000

2012/13

£50,000

2013/14

£50,000

2014/15

£40,000

 steve@bicknells.net

If you’re in health care the tax man is coming Reply

fear of dentist

The latest HMRC Task Force has been named as ‘The Health and Wellbeing Tax Plan’.

If you work in a health and wellbeing profession such as:

  • physical therapy – eg physiotherapist, chiropractor, chiropodist, osteopath, occupational therapist
  • alternative medicine or therapy – eg homeopathy, acupuncture, nutritional therapy, reflexology, nutrition
  • other therapy – eg psychology, speech therapy, arts therapy

You have until 31st December 2013 to notify HMRC and any unpaid tax has to be paid by 6th April 2014.

Health and wellbeing tax plan helpline
Telephone: 0845 600 4507
From outside the UK: +44 1792 657 324
Monday to Friday, 8am to 6:30pm

Marian Wilson, Head of HMRC Campaigns, said:

“I urge health and wellbeing professionals to take advantage of our quick and straightforward way of bringing their tax affairs up to date. Help, advice and support is available.

“After the opportunity closes on 6 April, HMRC will use information it holds from third parties and regulatory bodies to identify people who have not paid what they owe. Penalties – or even criminal prosecution – could follow.”

Do you have anything to declare? HMRC can go back 6 years

steve@bicknells.net

10 ways to get paid faster Reply

Millionaire

Late payment kills businesses, it’s a fact.

Latest research shows that British SMEs are having to wait an average of 41 days longer than their original agreed payment terms before invoices are paid. (source: BACS)

So what can you do to get paid faster?

  1. Get payment upfront – It might sound obvious but do you ask for payment with order? or deposits? or to be paid on delivery?
  2. Get Stage Payments – on projects agree stages and collect payment before you do the next stage
  3. Raise the Invoice quickly – as soon as you can bill the client send out the invoice
  4. Agree Terms of Business and Payment Terms before you start any work
  5. Make sure you know who to bill and who to chase for payment
  6. Make your invoice stand out, use bright colours and send a copy by Post and E Mail
  7. Offer multiple payment methods – Credit Card, BACS, Cheques, PayPal – make it easy for your client to pay you
  8. Offer a discount for prompt payment
  9. Charge interest for late payment
  10. Deal with any disputes quickly

steve@bicknells.net

Will ‘Help to Buy’ cause a housing market boom? 2

Home Office

Help to Buy was due to start in January 2014 but it’s been brought forward to start this week.

Here is a link to the 2013 Budget Info Graphic explaining how it works (the rules have been changed a little but it’s a good outline) – HM Treasury

Here is David Cameron announcing the scheme on the BBC on Sunday 29th September

A Help to Buy mortgage guarantee lets you buy a newly built home or an existing property with a deposit of only 5% of the purchase price.

Help-to-Buy will initially be available under the Nat West, RBS and Halifax brands.

Help to Buy mortgage guarantees will be open for loans not only to first time buyers but also to existing homeowners, and be available on new and existing houses with a value of up to £600,000. Buyers must have a 5% deposit.

The Government will guarantee the next 15% of the loan for a fee.

The Help to Buy mortgage guarantee will increase the supply of high loan-to-value mortgages.

The plan has drawn criticism from the International Monetary Fund and Business Secretary Vince Cable, who say it may spark a property bubble.

What do you think?

steve@bicknells.net