Helpful Comments on Tax and Finance – Bicknell Business Advisers Limited www.bicknells.net
Author: Steve Bicknell
Progressive Property Approved Accountant, Business Expert and Trainer/Speaker with Redcliffe Training, MBL Seminars and UK Training
►MD ► Bicknell Business Advisers ✸ family business providing accountancy, tax, and consultancy services to SME's and Start Ups - Xero, Sage One, QuickBooks, Freeagent, Kashflow, Hammock, Dext - Receipt Bank ✸ www.bicknells.net www.stevejbicknell.com
Motorbikes have a clear tax advantage over company cars because they are classified as plant and machinery. This is better for both employers and employees.
Capital Allowances are restricted on cars based on CO2 emissions and employees also get taxed on the benefit in kind based on CO2.
Motorbikes being plant and machinery aren’t restricted and you could use the Annual Investment Allowance to offset the cost.
The Benefit In Kind is assessed as 20% of the cost of the motorbike but there will also be a benefit in kind on fuel, repairs and insurance.
The company will also have to pay 13.8% Class 1A NI on the benefit in kind but that applies to most benefits including cars and motorbikes.
Would motorbikes be a viable option for your employees?
Until the Summer Budget 2015 when you purchased a business (not its shares) into a limited company from an unrelated party you could write off the goodwill (Intangibles) against your corporation tax but that has now changed and you can’t, another tax relief bites the dust!
In accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Goodwill can therefore be thought of as representing the value of a business’s reputation and customer relationships.
This measure removes the tax relief that is available when structuring a business acquisition as a business and asset purchase so that goodwill can be recognised. This advantage is not generally available to companies who purchase the shares of the target company. The current rules allow corporation tax profits to be reduced following a merger or acquisition of business assets and can distort commercial practices and lead to manipulation and avoidance. Removing the relief brings the UK regime in line with other major economies,reduces distortion and levels the playing field for merger and acquisition transactions.
Intangibles acquired before 8 July 2015 will continue to be treated under the old rules, so a corporation tax deduction will continue to be available for amortisation, and any loss on disposal will be treated as part of the company’s trading profit or loss for the year of disposal.
Renting out a Room is a great way to earn some tax free cash and in the Summer Budget an increase in the tax free allowance was announced…
The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016. The value of this relief has been frozen since 1997, so this increase will allow individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rent.
You can use the scheme if:
you let a furnished room to a lodger
your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning
You can’t use the scheme if the accommodation is:
not part of your main home when you let it
not furnished
used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
Housing and home ownership are a top priority in the UK and last week new proposals were announced in the Productivity Plan (see page 11 section 9)
The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home. The government will:
introduce a new zonal system which will effectively give automatic permission on suitable brownfield sites
take tougher action to ensure that local authorities are using their powers to get local plans in place and make homes available for local people, intervening to arrange for local plans to be written where necessary
bring forward proposals for stronger, fairer compulsory purchase powers, and devolution of major new planning powers to the Mayors of London and Manchester
extend the Right to Buy to housing association tenants, and deliver 200,000 Starter Homes for first time buyers
restrict tax relief to ensure all individual landlords get the same level of tax relief for their finance costs
Automatic planning consent on Brownfield sites, when approved, follows a number of other important incentives such as the Starter Homes initiative 20% discount.
The 20% discount is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.
At the heart of the Starter Homes initiative is a change to the planning system. This will allow house builders to develop under-used or unviable brownfield land and free them from planning costs and levies. In return, they will be able to offer homes at a minimum 20% discount exclusively to first time buyers, under the age of forty. Under the proposals, developers offering Starter Homes would be exempt from those Section 106 charges and Community Infrastructure Levy charges. The homes could then not be re-sold at market value for a fixed period – making sure that the savings are passed onto homebuyers.Gov.uk
To qualify first time buyers must be under the age of 40 and living in England.
Also the Help to Buy ISA for first time buyers where they could qualify for a £3,000 bonus
There is also the Help to Scheme where home buyers may only need a 5% deposit
With a Help to Buy: equity loan the Government lends you up to 20% of the cost of your new-build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
You won’t be charged loan fees on the 20% loan for the first five years of owning your home.
The current dividend tax credit system is a bit confusing and works as follows
You want to pay a dividend of £900. Divide £900 by 9, which gives you a dividend tax credit of £100. Pay £900 to the shareholder – but add the £100 tax credit and record a total of £1,000 on the dividend voucher. The dividend is then shown gross on the tax return and then the 10% tax credit is deducted rates of tax are then applied as noted below.
Dividend tax rates before April 2016
Tax band
Effective dividend tax rate
Basic rate (20%) (and non-taxpayers)
0%
Higher rate (40%)
25%
Additional rate (45%)
30.56%
This will change from April 2016, see the table below
Dividend tax rates after April 2016
Tax band
Effective dividend tax rate
Tax Free £5,000
0%
Basic Rate Tax Payers (20%)
7.5%
Higher Rate Tax Payers (40%)
32.5%
Additional Rate Tax Payers (45%)
38.1%
But be warned!
While these rates remain below the main rates of income tax, those who receive significant dividend income – for example due to very large shareholdings (typically more than £140,000) or as a result of receiving significant dividends through a closed company – will pay more.
These changes will also start to reduce the incentive to incorporate and remunerate through dividends rather than through wages to reduce tax liabilities. This will reduce the cost to the Exchequer of future tax motivated incorporation (TMI) by £500 million a year from 2019‑20. The tax system will continue to encourage entrepreneurship and investment, including through lower rates of Corporation Tax. (HM Treasury Summer Budget 2015)
The FRC have just published their Key Facts and Trends in the Accountancy Profession – June 2015
The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. We promote high standards of corporate governance through the UK Corporate Governance Code. We set standards for corporate reporting, audit and actuarial practice and monitor and enforce accounting and auditing standards. We also oversee the regulatory activities of the actuarial profession and the professional accountancy bodies and operate independent disciplinary arrangements for public interest cases involving accountants and actuaries.
It compared ACCA, CIMA, CIPFA, ICAEW, CAI, ICAS, AIA and found CIMA grow its members by 16.9% between 2010 and 2014, well above the average of 10.3% and beating the growth rate of all the others.
23% (77,551 out of 335,552) UK accountants are CIMA members.
CIMA also had the biggest growth in Worldwide Students 28.8% between 2010 and 2014.
The sectorial employment data in figure 5 showed that 75,429 (97%) work in Industry & Commerce which is 28% of accountants in Industry & Commerce.
Workers have won a ground-breaking case at the Employment Appeal Tribunal to include overtime in holiday pay.
This means some people working overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.
Since then we have had further legislation, the Deduction from Wages (Limitation) Regulations 2014 (the Regulations), which impose the 2 year limit on any new holiday pay claims raised from 1st July 2015 onwards. Separately, a recent case from the Northern Ireland Court of Appeal (Patterson v Castlereagh Borough Council) suggests that voluntary overtime may – in some circumstances – have to be included in holiday pay calculations.
The Northern Ireland Court of Appeal has just held that there is no reason why voluntary overtime cannot be part of an individual’s normal working week and therefore could be included in holiday pay calculations.
This will be bad news for many employers and in Scotland there are now 21,000 holiday pay claims in the Scottish Tribunal system alone. [Law-Now]
Whilst I am sure may employees will welcome the decision, this will surely lead employers to reconsider whether using contractors would be cheaper? No Holiday Pay, No Auto Enrolment Pension, No Redundancy or Statutory Pay
Many already predict that by 2020 50% of workers will be self employed!
Created in 1992 by Drs. Robert S. Kaplan and David P. Norton, the Balanced Scorecard (BSC) is a revolutionary way to handle strategy management. Notably, it centers your vision and strategy around four distinct measures: Customer, Internal Processes, Financial, and Learning/Growth. Essentially, the Balanced Scorecard allows you to get your whole team on the same page with organizational goals in a clear and understandable way. Although it started out being used primarily in the private sector, you’ll now see the Balanced Scorecard in healthcare, non-profit, government organizations, and a number of other types of associations. [Clear Point Strategy]
Here are 10 examples for different types of businesses – click here
About half of major companies in the US, Europe and Asia are using Balanced Scorecard Approaches. The exact figures vary slightly but the Gartner Group suggests that over 50% of large US firms had adopted the BSC by the end of 2000. A study by Bain & Co finds that about 44% of organisations in North America use the Balanced Scorecard and a study in Germany, Switzerland, and Austria finds that 26% of firms use Balanced Scorecards. The widest use of the Balanced Scorecard approach can be found in the US, the UK, Northern Europe and Japan.
Even the most brilliant strategy is worth nothing if it isn’t executed well, especially by your front line — the employees who interact daily with your customers. Unfortunately, these employees are regularly asked to execute strategies that others developed and that they may not understand, never mind feel committed or connected to. In fact, according to Robert Kaplan and David Norton, the founders of the Balanced Scorecard, only 5% of employees understand their company’s strategy. This makes successful execution nearly impossible.
Watch this video, how well would your employees do if you asked them about strategy?
We all like getting something for free, well now you can get free access to 170 million company records.
In line with the government’s commitment to free data, Companies House announced on 22nd June 2015 that all public digital data held on the UK register of companies is now accessible free of charge, on its new public beta search service.
This provides access to over 170 million digital records on companies and directors including financial accounts, company filings and details on directors and secretaries throughout the life of the company.
As a result, it will be easier for businesses and members of the public to research and scrutinise the activities and ownership of companies and connected individuals. Last year (2013/14), customers searching the Companies House website spent £8.7 million accessing company information on the register.
