Month: April 2017

Are you an employee and is a yacht a ship for the seafarers earnings deduction?

The rules say….

If you’re an employee and work at sea, you may be able to reduce your tax bill by getting the Seafarers’ Earnings Deduction.

To get the deduction you must have:

  • worked on a ship
  • worked outside of the UK long enough to qualify for the deduction – usually a minimum of 365 days
  • been resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK)

You can’t get the deduction if you were:

  • a Crown employee (eg, a Royal Navy sailor)
  • not a UK resident
  • not a resident of an EEA State (other than the UK)

If you had more than one job you’ll still get the deduction against your seafarer pay if you meet all the conditions.

https://www.gov.uk/guidance/seafarers-earnings-deduction-tax-relief-if-you-work-on-a-ship

So if you are self employed – Sole Trader or Partnership – you can’t be an employee.

If you work on cruise ship or a shipping line you will probably be an employee so that’s fine but if you would on other ships then you should create your own Limited Company so that you can be an employee.

HMRC are actively investigating many self assessment returns where the claim for Seafarers Deductions has been incorrectly made.

The mechanics of the deduction –  the first stage is to calculate what the legislation (ITEPA 2003, s 378(2) and (3)) calls an eligible period, which:

  • is a period of at least 365 days;
  • begins and ends with a period of absence from the UK;
  • does not include any single period of presence in the UK in excess of 183 days; and
  • at least half of which is spent outside the UK (the 50% test to which All at Sea refers).

Then its based on employment earnings.

Here is a tax calculator to help http://seafarerstaxcalculator.com/

A Ship is large sea vessel carrying passengers or cargo, so its unlikely a yacht would be considered a ship. Although if its large enough it might.

steve@bicknells.net

 

Making Tax Digital – Sanctions for Late Submission and Late Payment

Making Tax Digital is coming soon!

It will will eventually affect us all, businesses including property investors will have to initially file their accounts quarterly and then ultimately monthly.

For many this will be a huge shift from annual accounts and self assessment returns.

HMRC will be able to estimate your tax each time you submit a return.

The government have confirmed that taxpayers will be given a period of at least 12 months before they will be charged any late submission penalties in relation to their Making Tax Digital for Business obligations.

Making Tax Digital – sanctions for late submission and late payment is open for you to respond until 11 June. The consultation seeks views on three possible models for late submission penalties and provides an update on late payment penalty interest.

Model A – the Points Based System

Model B – Compliance Reviews with Penalties

Model C – Suspension with conditions

Read further details at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/601136/Making_Tax_Digital_-_sanctions_for_late_submission_and_late_payment.pdf

steve@bicknells.net

Business Connections Newsletter – April

Did you see our April Newsletter:

  • What are the rules on subsistence and travel?
  • Will you be able to file your accounts every quarter? making tax digital
  • How do you leave the Flat Rate Scheme?
  • #BHBanterAbout – Cloud Telephony – 2nd May 2017

Click on this link to get a copy http://mailchi.mp/bicknells/bicknell-top-blogs-april-2017

Sign up to our mailing list http://eepurl.com/b6k7HH

steve@bicknells.net

Working abroad? what about Principle Private Residence Relief?

There are special rules if you work overseas (and rules for working away in the UK)
This blog focuses on working overseas. The important thing to make sure you keep good records and tell your accountant!
Office/employment outside UK
TCGA92/S223 (3) (b)
You may allow relief for a period of absence of any length throughout which an individual worked in an employment or office all the duties of which were performed outside the United Kingdom, or a period of absence throughout which the individual lived with a spouse or civil partner who worked in such an employment or office if the conditions set out in CG65046 are fulfilled.
All of the duties of the employment must be performed outside the United Kingdom. You can ignore any return to the United Kingdom for holidays, but you should not ignore any duties which are in practice performed in the United Kingdom even if they are only incidental to the main duties performed outside the United Kingdom.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65040

Condition A
Before the period of absence there must be a time during which the dwelling house was the individual’s only or main residence.
Condition B

After the period of absence there must be a time during which the dwelling house is the individual’s only or main residence (if within S223 (3) (a), (b), (c) or (d))

Use of residence during period of absence
It does not matter how the residence is used during a qualifying period of absence. For example, it may be let without any loss of relief.

 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65050

steve@bicknells.net

Why have we made UK Tax so complicated!

Here are the facts:

  • 6,102 pages of legislation (according to Tolleys in 2012)
  • 639 monetary values
  • 425 thresholds
  • 214 penalties

Click to access OTS_Focus_paper_on_complexity_final.pdf

The Office of Tax Simplication have been working on ways to simply things since 2010 but it seems to me every time we change things we just create more rules!

How will tax payers be able to cope with Making Tax Digital and the introduction of Quarterly and eventually Monthly reporting!

steve@bicknells.net

Payroll Year End 2017 – What about P11D’s?

By now you will have already processed your payroll year end and submitted the final RTI submissions.

You have to pay your PAYE by 19th April and issue P60’s by 31st May.

So the next main date is P11D Benefits in Kind! due by 6th July

Last year Dispensations ended and Payrolling Benefits became an option but you must be registered

If you choose to payroll you can tell HM Revenue and Customs (HMRC) online. You need to register online before the start of the tax year you want to payroll for.

You must add the cash equivalent of the employees’ benefits to their pay and then tax them through your payroll.

HMRC will make sure the value of the benefit is not included in your employees’ tax codes.

If you use the service you:

  • won’t need to use form P11D
  • still need to work out the Class 1A National Insurance contributions on benefits and complete form P11D(b)

You can exclude employees from payrolling once you’re registered, but you’ll need to send a P11D to declare the non-payrolled benefits.

Once the tax year has started you’ll have to payroll the benefits for the whole of the tax year, or until you stop providing them.

https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll

Many businesses will continue to submit P11D’s

At the end of the tax year you’ll usually need to submit a P11D form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

You’ll also need to submit a P11D(b) form if:

  • you’ve submitted any P11D forms
  • you’ve paid employees’ expenses or benefits through your payroll
  • HMRC have asked you to – either by sending you a form or an email

Your P11D(b) tells HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided.

If HMRC have asked you to submit a P11D(b), you can tell them you don’t owe Class 1A National Insurance by completing a declaration.

https://www.gov.uk/employer-reporting-expenses-benefits/reporting-and-paying

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

  • business travel
  • phone bills
  • business entertainment expenses
  • uniform and tools for work

To qualify for an exemption, you must be either be:

  • paying a flat rate to your employee as part of their earnings – this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC
  • paying back the employee’s actual costs

steve@bicknells.net

My 3 favourite Apps from #SageSummit 2017

These Apps all connect to Sage One, our favourite Sage software

9 Spokes

9 Spokes is FREE!

See how your business is performing simply by connecting your apps to 9 Spokes. Your dashboard will reveal how your cash flow, people and sales are tracking, all in one place.

https://www.9spokes.com/how-it-works/

Sales Seek

Get a more complete view of your sales pipeline with our unique and highly-visual Sales Funnel.
Dive deep into your hottest and most active deals with our ‘Sink or Swim’ view and leave no deal unturned by highlighting which deals need to be followed up on.

https://www.salesseek.net/features/

Expensify

Let Expensify’s intelligent automation handle your expenses in realtime. Because you have better things to do.

Expensify can also track and report your business mileage.

https://use.expensify.com

steve@bicknells.net

Making Tax Digital – the Pilot has started!

Whether you like it or not, Making Tax Digital is coming to us all!

HM Revenue and Customs’ (HMRC) ambition for most businesses to keep records digitally and send quarterly summary updates moves a step closer with the launch of the Making Tax Digital for Business (MTDfB) pilot.

In April, HMRC will invite some customers, both businesses and their agents to sign up for a new way to report income and expenses online. At different stages of the pilot customers will help HMRC develop and improve the new service by:

  • using accounting software to record their business income and expenses
  • sending summary reports of their income and expenses direct from their digital records quarterly or more often if they choose
  • signing up to go paperless

Based on the information they report, customers will get an estimated tax calculation.

As soon as the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters.

Customers who aren’t invited to take part in the pilot at the beginning won’t be able to start sending quarterly reports to HMRC immediately, but they can:

  • start to use accounting software to keep their records if they don’t already

  • check with their software supplier, or agent, that any software they use is compatible with quarterly reporting

https://www.gov.uk/government/news/hmrc-launches-a-new-way-to-report-income-and-expenses-online

steve@bicknells.net

What is the optimum pay for business owners in 2017/18?

Most small business owners will either choose £8,164 as a salary (free of tax an NI) or £11,500 (tax free)

If you are not eligible for the Employment Allowance, then £8,164 will probably be the best option, it will reduce your corporation tax bill by 19% x £8,164 = £1,551

If you can claim the employment allowance then £11,500 will probably be best because that will save 19% x £11,500 = £2,185

Less Employee NI to pay at 12% x (£11,500 – £8,164) = £400

Net Saving £1,785

Beyond this you will pay income tax at 20%.

So in summary, I think the optimum salary is £11,500 or £8,164

Above this you should take dividends. The Dividend Allowance for 2017/18 is £5,000.

This is a simplification and you should speak to your accountant about your specific tax affairs.

steve@bicknells.net

Will you have to pay the Apprentice Levy?

This will affect employers in all sectors. The levy will only be paid on annual paybills in excess of £3 million, and so less than 2% of UK employers will pay it.

If you’re an employer with a pay bill over £3 million each year, you must pay the apprenticeship levy from 6 April 2017.

The levy will be charged at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment.

If you are a levy-paying employer, you can now create an account on the apprenticeship service to:

  • receive levy funds for you to spend on apprenticeships
  • manage your apprentices
  • pay your training provider
  • stop or pause payments to your training provider

What you can buy with funds in your apprenticeship service account

You can only use funds in your account to pay for apprenticeship training and assessment for apprentices that work at least 50% of the time in England, and only up to the funding band maximum for that apprenticeship.

If the costs of training and assessment go over the funding band maximum, you will need to pay the difference with other funds from your own budget.

You can’t use funds in your account to pay for other costs associated with your apprentices (such as wages, statutory licences to practise, travel and subsidiary costs, work placement programmes or the setting up of an apprenticeship programme).

Changes for employers who don’t pay the levy

Support with apprenticeship costs

Non-levy paying employers will share the cost of training and assessing their apprentices with government – this is called ‘co-investment’.

From May 2017, you will pay 10% towards to the cost of apprenticeship training and government will pay the rest (90%), up to the funding band maximum.

steve@bicknells.net