Should Income Tax and National Insurance be merged? Reply

Pay Packet And Banknotes

On the 14th November 2016 published Closer alignment of income tax and national insurance: a further review

ni-and-tax

The Office of Tax Simplification (OTS) are therefore recommending that government make changes to make NI more like PAYE.

This isn’t a new idea, its been kicked around since 1943! and George Osborn said it was good idea in his last budget

Will it get a mention in tomorrows Autumn Statement?

steve@bicknells.net

 

Do we need lookthrough taxation? NO Reply

the mirror

This month (November 2016) the Office of Tax Simplification published their Final Report on Lookthrough Taxation.

The proposal was that for Small Companies instead of charging the company tax (corporation tax), tax (income tax and national insurance) would be charged directly on the stakeholders based on their share of the profits. The end result being that Small Companies are treated in the same way as Sole Traders.

Back in July the OTS asked this key question Overall would lookthrough deliver simplification? and the answer was NO

Many suggested that it would discourage entrepreneurs and reduce funds retained in the business.

There are also complications such as Directors Loan Accounts and Salaries (including to family members).

Introducing lookthrough tax would have meant shareholders would be subject to Income Tax and Class 4 NI on company profits.

This could be the for runner to a longer study comparing Employees to Sole Traders to Companies.

For now common sense has prevailed.

The OTS report states Our conclusion is that lookthrough does not offer sufficient simplification to justify its introduction. On balance we feel that it would be more complicated than the current tax system, given the additional rules that would be needed

steve@bicknells.net

 

 

What if you buy personal items on a business credit card or BBX card? Reply

couple using credit card to make online purchases

Sometimes its accidental, using the wrong card linked to say Amazon, and sometimes its because it makes sense, for example with BBX.

For example BBX have a trade show which focuses on personal purchases

bbx-christmas

Self Employed

If you’re self employed then any personal spending is Drawings.

Drawings don’ affect your tax as you pay tax based on your profit.

Company Directors

The most common treat is to post personal expenses to the directors loan account. This is a balance sheet account and shows the balance the director owes to the company or that the company owes the director.

The Directors Loan Account is often cleared with dividends.

Alternatively the personal expenditure could be treated as additional salary or as a benefit in kind.

You can’t reclaim VAT on personal expenditure.

Whatever you do make sure the Directors Loan isn’t overdrawn 9 months after year end or you will pay an additional temporary tax charge.

https://stevejbicknell.com/2016/06/22/hmrc-directors-loan-2016-rules/

https://stevejbicknell.com/2016/05/31/how-can-you-avoid-being-taxed-on-a-directors-loan/

steve@bicknells.net

 

How many BBC Presenters are at risk under IR35? Reply

Woman with microphone

IR35 is a nightmare for contractors, since it came into force on the 6th April 2000, it has never been clear cut as to whether a contractor is in or out of IR35. Being in IR35 means paying a lot more tax.

There are a range of factors to consider, including:

1. The nature of the contract and written terms
2. Right of substitution
3. Mutality of obligation
4. Right of control
5. Provision of own equipment
6. Financial risk
7. Opportunity to profit
8. Length of engagement
9. ‘part and parcel’ of the organization
10. Entitlement to employee-type benefits
11. Right of termination
12. Personal factors
13. The intention of the parties

HMRC estimate that there are 200,000 personal service companies.

Since July HMRC have been pursuing BBC Presenters and so far it looks like 100 presenters are on their list, this will of course be the tip of iceberg and many more will be caught if HMRC win.

Why can’t we just have a simple online test for IR35 as we do with employment status! it would save so much confusion

steve@bicknells.net

Why is international VAT so complicated! Reply

Stress business woman

EU VAT is a nightmare.

Here is an example of why its complicated…

Before 1st January 2015 all businesses supplying telecommunications, broadcasting and e-services such as downloaded ‘apps’, music, gaming, e-books and similar services to private consumers located in other EU Member States (referred to as ‘B2C’ supplies) were taxed where the business supplier was established, which is simple to understand and implement.

Since 1st January 2015 VAT is now charged in the country where the customer has ‘use and enjoyment’ of the services.

So lets say you are an American (normally zero rated) on holiday in France, even though you pay with an American credit card and buy from a UK supplier because you are reading your ebook in France, French VAT will apply. Sounds like a nightmare, doesn’t it.

To help with this HMRC introduced the VAT MOSS (Mini One Stop Shop).

Then there is is the VAT return….

Box 2 Acquisition Tax is calculated as UK VAT due on VAT free purchase of goods from other Member States, i.e. 20% x Box 9 figure, the same amount is then entered in Box 4 (as noted below by HMRC) so the net effect is Zero.

Box 9 Total EU Purchases are the value of goods bought from other EU Member States on a VAT free basis.

The following are HMRC’s instructions:

Box 2: VAT due from you (but not paid) on acquisitions from other EU countries

You need to work out the VAT due – but not yet paid by you – on goods that you buy from other EU countries, and any services directly related to those goods (such as delivery charges). Put the figure in Box 2. You may be able to reclaim this amount, and if so remember to include this figure in your total in Box 4.

Box 4: VAT reclaimable on your purchases

This is the VAT you have been charged on your purchases for use in your business. You should also include:

  • VAT due (but not paid) on goods from other EU countries and services directly related to those goods (such as delivery charges) – this is the figure you put in Box 2

http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm#4

If you trade regularly with the EU you may be required to do Intrastat Returns

Here is a useful guide from Sage.

steve@bicknells.net

Will Making Tax Digital (MTD) make life easier for you? Reply

mtd

 

One of the big areas of concern has been over the quarterly tax reporting requirements and concerns over data accuracy, as a result, the government has given exemptions for small businesses which will mean 5.4 million small businesses won’t now need to report quarterly.

Data accuracy is going to be critical, are most businesses up to providing data in real time? RTI has worked for payroll but could it really work for accounting information? many businesses rely on their accountants and book keepers to get the information correct.

steve@bicknells.net

Is your Salary Sacrifice going to be taxed? Reply

Parking design

Its a busy time for Government Consultations, we have one currently underway called

It runs until 19th October 2016.
Some salary sacarifice items will be protected from any changes:
  • Workplace Childcare
  • Employer Pensions
  • Cycling to work

But everything else is up for grabs for example parking…

Parking

 

Which of your salary sacrifices are at risk?

 

steve@bicknells.net

Do you struggle to understand your accountant? 1

omg man

Let’s face it, tax is complicated, accounting is generally seen as boring but essential and most business owners are focused on their business and don’t focus on the numbers, that’s why they need accountants to keep them on track with:

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Busines Funding and Investment
  • Tax Planning
  • KPI’s

Let’s work together to help you understand and feel in control.

We aren’t all boring!

In fact its actually exciting to help business achieve their goals.

 

 

Accountants

ICAS reported recently based on IFAC research..

SMEs were shown to traditionally rely on accountants as a main source of business advice. One study identified an 8.1% average increase in sales growth and a 29% decrease in likelihood of failure for businesses using an external accountant.

Work with us and we will help to you to succeed.

 

steve@bicknells.net