HMRC open discussions on Penalties Reply

Scaring amounts

On 2nd February 2015 HMRC launched HMRC Penalties: a Discussion Document

Closing date 11th May 2015.

HMRC state…

We don’t use penalties as a way of raising revenue, or to offset our running costs. In essence, we want compliance, not penalties.

Do you think HMRC penalties are fair? do they work? how could the system work better?

Why not use the discussion document to help HMRC to change the system and improve the way penalties are applied.

steve@bicknells.net

Is my website a fixed asset? 1

WWW Website

HMRC use the Analogy of a shop window….

The cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue. (BIM35870)

UITF Abstract 29

Set out 4 key areas of cost:

  1. Planning – P&L
  2. Application and infrastructure development – Tangible Fixed Asset
  3. Design costs – P&L
  4. Content costs – P&L

HMRC also have some useful information on software in CA23410

CAA01/S71

Computer software qualifies for PMAs if it is not already plant.

Computer software is not defined in the capital allowance legislation. You should treat computer programs of any type and data of any kind as computer software. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is sometimes transferred by electronic means, for example it may be downloaded over the Internet. Software acquired that way is also plant.

A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right.

 

Capital Allowances and the Annual Investment Allowance can be claimed against Plant including software.

steve@bicknells.net

Will your tax return stand up to HMRC Profit Benchmarking? 1

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HMRC have been doing lots of research on SME businesses, the most interesting areas of research are:

Understanding Small and Medium Enterprise (SME) business life eventsSME Customer Journey Mapping

Research was carried out to understand:

  • the key life events and activities that SMEs experience
  • how these relate to tax
  • what opportunities there are for the improvement of HM Revenue and Customs (HMRC) services by more closely aligning them to business lifecycles

The Transparent Benchmarking Team Statement (November 2014)

HMRC is conducting a number of pilots, focussed on SME customers, designed to explore the effectiveness of publishing benchmarks on aiding greater voluntary compliance.

Following the first pilot (benchmark net profit ratios for Painters and Decorators, and Driving Instructors) in March 2014, HMRC will run two more in the autumn. One of these will focus on self-employed taxi drivers and pharmacists, where HMRC will be writing to around 2,500 agents that have a number of clients in the target sectors. The idea is to test whether publishing benchmarks through an agent is more effective than writing to a customer directly. Letters will also be sent to a sample of represented and unrepresented customers within the selected sectors to form control groups for evaluation purposes. All represented individuals and businesses written to directly will be informed that their agent has not received a copy of the letter.

The benchmark for both sectors is the net profit ratio. Because this is a controlled pilot exercise, not all agents or businesses within the relevant sectors will be receiving a letter. (source CIOT)

The Benchmarks we know so far are:

  • Painters & Decorators range from 59% to 79%
  • Driving Instructors 31% to 67%

So the range of profits are big!

We await the ranges for Taxi Drivers and Pharmacists.

If your profit doesn’t fit then you need to know why.

Do not ignore the letter because HMRC are likely to follow it up and assume you are deliberately trying to avoid tax!

You may have some valid reasons for not fitting the benchmark and you must explain those reasons to HMRC.

A deliberate error will results in a higher penalty (up 100% of the tax) but can also open the door to HMRC going back over up to 20 years of your accounts!

The letters refer to common mistakes in:

  • Travel Expenses
  • Telephone Costs
  • Utility and insurance charges
  • Professional Fees
  • Capital Expenditure

You may find these blogs helpful

Motor Expenses

Travel Expenses

Home Office Expenses

10 Ways to Save Tax

HMRC also have some useful toolkits/checklists…..

Business Profits Toolkit

Private and Personal Expenditure Toolkit

steve@bicknells.net

SCA Group Announce Acquisition of Access Scaffolding IOW Reply

Businessman hand touching M & A - merger & acquisition concept

SCA have recently completed the acquisition of Access Scaffolding IW, and have formed a single division for our Isle of Wight operations that will become the largest provider of contract scaffolding on the island. Access Scaffolding IOW will exist as a wholly owned subsidiary of the SCA Group, with the existing owner, Ashley Palmer, excited to commit his future to the new venture.

Ashley Palmer’s scaffolding business, Access Scaffolding, has been a presence on the Isle of Wight for many years, and the business has undergone substantial growth under Ashley’s stewardship, forging some great partnerships and working relationships along the way. SCA recognises the potential in Ashley’s business, and the hard work that has gone in to creating such a fantastic company, and coupled with our resources, reputation and enhanced service provisions, we believe that we can further improve the offering to the Isle of Wight, and build upon some well laid foundations.

SCA also has vast experience of working on the Isle of Wight with local people and local businesses, and we can further establish the reputation of ‘SCA Access IOW’ through our accreditations and memberships, not to mention our network of contacts and customers. As full members of the National Access & Scaffolding Confederation, or the NASC (as one such example), we can demonstrate our dedication to high standards of workmanship, attention to detail, and ability to work to the highest levels of health and safety, something that can only bring additional benefits to the service we can provide.

Ashley’s focus in the past has been on delivering a high quality, access scaffolding service to his clients, which has served the market well. With SCA’s influence, we can expand on these capabilities, and offer a wider package including Rope Access and Industrial Painting as well, and we look forward to exploring these possibilities with Ashley on board.

With the formation of a single division now complete, it is essential to us that ongoing activities remain uninterrupted, and with this at the forefront of our minds, all existing customer contracts of Access Scaffolding will be fulfilled as scheduled as we look to not only maintain existing relationships, but build and strengthen them as well.

Should you have any queries or concerns or future requirements for the new division, please note all the relevant contact details below:

Mr Ashley Palmer
Contracts Manager
Mobile:                07917 132390

Mr Barry Westbrook
Divisional Director
Mobile:                07736 691184
Head Office:       01202 820820

Companies House reports will be Free in 2015 Reply

Businessman get idea

Its time to review your subscription to company information databases!

Companies House is to make all of its digital data available free of charge. This will make the UK the first country to establish a truly open register of business information.

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.

Until it becomes free in 2015, you will still have to pay

Companies House WebCHeck Charges
Company accounts £1
Annual return £1
Company record report £1
Current appointments report FREE
Monitor Service (per company, per year) FREE

This change will come into effect from the second quarter of 2015 (April – June).

steve@bicknells.net

 

When will your company stop being small? Reply

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Back in June 2013 the EU passed a directive 2013/34/EU which changed the thresholds for small companies.

 

Present Proposed
Turnover  £6,500,000  £10,200,000
Total assets  £3,260,000  £5,100,000
Average no. of employees  50 50

As before its a  2 out of 3 test. The Audit thresholds are unchanged.

The UK was required to transpose this into UK Law no later than 20th July 2015.

The Dept for Business Innovation and Skills (BIS) have just concluded their consultation (24th October 2014) and the plan is currently to implement the change for financial years starting on or after 1st January 2016.

As pointed out by SWAT

This could mean that a company with a turnover between £6.5m and £10.2m will be required to prepare its accounts for year ended 31 December as follows:

2014 as a medium sized company under present UK GAAP;

2015 as a medium sized company under FRS 102;

2016 as a small company under the applicable accounting regime for small companies.

This might depend on whether the company could early adopt the new regulations for its 2015 accounts. The possibility of early adoption is one of the questions asked by BIS.

Surely BIS can see that not allowing early adoption will place an unnecessary reporting burden on Small Companies?

 

steve@bicknells.net

Will you be exporting in Export Week? Reply

Export - Red Hanging Cargo Container.

Its the UK Trade and Investment’s 6th annual Export Week (10 to 14 November).

Previous Export Weeks have seen over 17,000 companies in the UK attend exporting focussed events. This week we will again have over 70 events across the UK; there will be at least one event per day in every part of the UK.

According to a recent survey by Barclays Corporate Banking, in new emerging markets 64% of consumers are more likely to buy a product which displays the Union Jack.

A survey by Exact back in June 2014 showed…

The survey of 453 SME leaders found that 54% of SMEs now sell products or services abroad. It found that exporting is the biggest growth area for 19% of the UK’s SMEs, and 68% of those who currently export saw export sales increase in 2013 over the previous year. For 18%, exports now account for over half their sales.

HMRC have a helpsheet TH/FS15 which has some helpful advice on importing and exporting.

So will your business be exporting this week?

steve@bicknells.net

Will your Share Buy Back pass the ‘trade benefit’ test? Reply

Successful Businessman With A Contract In Hand

Often as part of an exit strategy or succession planning companies will buy back shares.

Setting aside the mechanics, nicely explained in the ACCA Technical Factsheet 177 and the need for S1044 CTA 2010 clearance, the Buy Back has to be in the benefit of the trade not just the shareholder.

For example….

If the purpose is to ensure that an unwilling shareholder who wishes to end his association with the company does not sell his shares to someone who might not be acceptable to the other shareholders, the purchase will normally be regarded as benefiting the company’s trade.

Examples of unwilling shareholders are:

  • an outside shareholder who has provided equity finance (whether or not with the expectation of redemption or sale to the company) and who now wishes to withdraw that finance
  • a controlling shareholder who is retiring as a director and wishes to make way for new management
  • personal representatives of a deceased shareholder, where they wish to realise the value of the shares
  • a legatee of a deceased shareholder, where he does not wish to hold shares in the company

Assuming that the shares aren’t being bought back at Par Value, basic rate taxpayers will probably prefer dividends for any surplus where as higher rate taxpayer will want capital treatment.

Share Buy Back is complex, make sure you seek professional advice.

 

steve@bicknells.net

 

 

Are you one of the third of workers with a part time business? Reply

Business people group.

Almost a third of British workers run some kind of creative business outside their main job contributing an estimated £15bn to the UK economy, according to new research from Moo.com. Profitability among this group of enterprises has increased by 32% in the past year. One in ten part-time creative entrepreneurs plans to leave their job to focus on their business full-time within the next year. However, 60% said it was their passion for the business, and not making money, that motivated them. The most popular part-time creative ventures are in food and cooking, gardening, photography and knitting. (According to Law Donut)

So why are micro businesses taking off:

  1. You can start off working at home
  2. Your start up costs are low
  3. You can do it part time when it suits you
  4. With wages frozen and costs rising it can provide a useful additional income
  5. Its easy to be price competitive with low overheads
  6. The Internet makes it easy to sell your goods and services
  7. Your social capital can be used to generate sales ie use your contacts and connections
  8. There could tax advantages – employees generally pay more tax than sole traders
  9. Some clients prefer the personal touch
  10. It could be start of something big

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 http://www.netmums.com/back-to-work/working-for-yourself/direct-selling-opportunities
  19. Computer Repair – Great provided you have the skills
  20. Marketing – Telesales to leaflet design and freelance writing

 

steve@bicknells.net

We love Self Employment in UK….. Reply

Business people group.

The UK has seen the fastest growth in self-employment in Western Europe over the past year, according to the Institute for Public Policy Research (IPPR).

The number of self-employed workers rose by 8%, faster than any other Western European economy, and outpaced by only a handful of countries in Southern and Eastern Europe.

The IPPR’s analysis shows that the UK – which had low levels of self-employment for many years – has caught up with the EU average. If current growth continues, it says, the UK will look more like Southern and Eastern European countries which tend to have much larger shares of self-employed workers.

According to Tax Research UK

Something like 80% of all the new jobs created since 2010 are, in fact, self-employments, and there are a number of things that very significantly differentiate self-employments  from jobs.

The first is security:  there is none.

The  second is durability:  vast numbers of new small businesses fail, which is one reason why I doubt the official statistics.  I am sure they record the supposed start-ups  correctly but seriously doubt if they have properly counted the  failures.

Then there is  the issue of pay. The evidence is  overwhelming  that in recent years earnings from self-employment have, on average, declined significantly.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

In summary, why is it attractive to use Self Employed Freelancers?

  1. Skill is more important than location in many business sectors – we live in world where internet can allow you to work with anyone at anytime, you can now track down the best person to work with even if they live thousands of miles away
  2. Lower fixed costs – Using Freelancers will lower your fixed costs (in similar way to Zero Hours Contracts), you employ them for a specific project and only pay for what you need so there isn’t any surplus capacity
  3. Tax advantages – Freelancers run their own business and that means they pay less tax than employees. Employers save tax too, such as Employers NI.
  4. Competitive Advantage – You can put together a team for a contract rather than finding contracts that fit your workforce, this means you can hire the best.
  5. 110% Commitment – A Freelancers success and future work depends on them performing to the highest level on every contract, failure is not an option for a successful contractor.

So do you think self employment is good for the UK?

steve@bicknells.net