If your share value falls, so could your tax bill 2

fictitious newspapers

Did you know that in the case of Mr Brown v HMRC Mr Brown was able to claim a tax deduction for the loss in his share value without having to sell his shares? Its true, its known as a NegligibleValue Claim and HMRC have Help Sheet on it (286).

A negligible value claim enables you to set a capital loss against your income (or against other capital gains if you have them) for earlier years and claim a tax refund.

Many negligible value claims are made by shareholder directors whose company has failed. Their claim is to offset the loss on the shares in their company against their directors’ wages for earlier tax years.

When a taxpayer owns shares which become of negligible value the taxpayer may make a claim under s24 TCGA 1992, resulting in a deemed disposal and reacquisition, which crystallises a capital loss.

steve@bicknells.net

The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99
The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99

How changing your year end can help cash flow 2

Revenue and Customs

Basically if your company makes a loss you carry it forward.

The amount of trading loss available to be carried forward is the loss sustained less any loss relieved in the current year or surrendered as group relief.

Carry forward a corporation tax loss is automatic, therefore as no claim is required there is no time limit.

The legislative reference for a trading loss carried forward is: CTA 2010 s45) [old reference ICTA 1988 s393(1)].

You can also make a claim to carry a loss back 12 months.

The legislative reference for carry back loss relief is: CTA 2010 s37(s)(b)(6)(8) and s38 [old reference ICTA 1988 s393A(1)(b)(2)-(2C)].

But there is another option, to help improve your cash flow, lets say you have been making profits and you have just come to the end of your accounting period, the next few months are going to be tough and you will make a loss. If you change your year end by extending it or having a shorter period you could help your cash flow.

Corporation Tax is payable 9 months and 1 day after your year end, so you will have a return for 12 months and have tax to pay but if you had a 6 month return to follow it you could reduce the time before you claim relief for the loss.

If you extended your accounting period to 18 months the figures might even look better for credit rating.

You can shorten as much as you want but not beyond the start date of the accounting period being changed.

You can only extend once every 5 years.

See the Companies House Checklist for details

steve@bicknells.net

10 financial mistakes all new business should avoid 1

Stress business woman

Starting a new business is always a challenge but there are some common financial mistakes that all start ups should avoid.

  1. Lack of Planning – Businesses normally start with a great idea but you need to have business model that works and to at least have a basic business plan and cash flow.
  2. Over Trading – this happens when a business expands too quickly for its working capital, when you start a new business its tempting to accept every order without considering whether you can have the resources and the cash to deliver.
  3. Wasted Marketing and Advertising – new businesses are an easy target for marketing companies but its important to stick to the essentials to start with, having a website, e mail and business cards are essential, magazine advertising and other things can be done as the business grows, in the early stages you are experimenting and finding your market so if you spend too much too soon you might promote the wrong things at the wrong price.
  4. Wrong Business Structure – Before you start your business get some advice from your accountant, its important to choose the right structure not just for tax reasons but also for investment and ownership.
  5. Wrong Staff – Choosing the right team is critical for business success, choose staff that have the right skills, the right attitude and are dedicated to the success of the business.
  6. Over Ambitious – All too often businesses plans are over ambitious with sales growing rapidly, often they prove to be unrealistic, when preparing a sales forecast start with your order book and be cautious in your assumptions.
  7. Overheads – Many businesses over spend on overheads for example renting premises too early, work from home, if you can, to minimise costs.
  8. Stock Problems – Buying the wrong stock, under or over stocking are also issues for start ups, try to adopt a ‘just in time’ stock policy.
  9. Getting Paid – A sale is only a sale if you get paid, any one can give things away, make sure you manage your clients and get paid on time.
  10. Competition – Keep an eye on your competitors, they will be watching you and responding to maintain their market share.

steve@bicknells.net

Micro Entity Accounts – who can file them? 1

Micro Entity

Micro-entity accounts are a new type of accounts that can be submitted to Companies House from 1 December 2013. They will provide the smallest companies with the opportunity to prepare and publish simplified financial statements (profit & loss account; and balance sheet) if they wish.

A micro-entity is defined as meeting two of the following criteria:

  • Balance sheet total: £316,000
  • Net turnover: £632,000
  • Average number of employees during the financial year: 10 (or fewer)

Micro Entities are exempt from filing their profit and loss with Companies House.

Business Minister Jo Swinson said:

“Thriving micro-businesses are a vital ingredient for a stronger economy. However, because of their size they don’t always have dedicated finance teams behind them. We therefore need to make sure that they can focus on growing their business – rather than completing unnecessarily detailed paperwork.”

There are approximately 1.56 million micro-entities in the UK, as compared with a total number of companies on the UK register of approximately 2.8 million.

I don’t think this is going to help much? Micro Businesses still need to file corporation tax returns, deal with PAYE, RTI, VAT, minimum wage, Auto Enrolment Pensions, and a wide range of other requirements

steve@bicknells.net

Key Points from the Autumn Statement 2013 Reply

Tax Money

The Chancellor George Osborne presented the Autumn Statement to the House of Commons on 5th December 2013 and things are getting better, economic growth forecasts for this year have more than doubled from 0.6% to 1.4% but the austerity plan is set to continue.

Here is a summary of the key announcements:

Business Rates

Business rate increases in England will be capped at 2% in 2014/15 (they were set to increase by 3.2%) and businesses will be able to pay over 12 months rather than 10.

The Retail Sector will also get a £1,000 discount in 2014/15 and 2015/16, this applies to pubs, cafes, restaurants and charity shops with a rateable value below £50,000.

A reoccupation relief of 50% is being introduced for up to 18 months on premises that have been empty for a year or more and it will apply from 1st April 2014 to 31st March 2016.

Small Business Rate Relief has been extended to April 2015 under the scheme small businesses with a rateable value of £6,000 or less can get 100% relief, the relief is scaled down to zero on rateable values of £12,000 and there is a lower multiplier on rates between £12,001 and £17,999.

Income Tax

As previously announced the personal allowance will be £10,000 for the tax year 2014/15.

From April 2015, a spouse or civil partner who is not liable to income tax will be able to transfer £1,000 of their allowance to a basic rate tax paying spouse and as a result save £200 in tax.

State Pension Age

By 2020 it will be 66, by 2028 it will be 67 and by mid 2030’s 68, then in 2040’s 69.

Capital Gains Tax

The annual exempt amount will be £11,000 for individuals for 2014/15.

But there was an exemption for principle private residence  letting for 36 months and from 6th April 2014 it will be reduced to 18 months.

Consultation will start in April on non-residents paying capital gains on property disposals.

Individual Savings Account (ISA)

The limit will rise to £11,880 for 2014/15 and of this £5,940 can be invested in cash ISA’s

Mortgage Guarantee Scheme

The scheme started in October will run for 3 years and end in January 2017.

Buyers will only need a 5% deposit and the government and the funder will guarantee 15% of the loan in return for a fee.

IR35

Legislation will be tightened from April 2014.

Anti-avoidance

A range of measures were discussed in addition to IR35 and these included:

  • Partnership Tax
  • Controlled foreign companies
  • Charities
  • High risk tax avoidance schemes
  • Dual contracts

Other headline measures

  • Employers NI for under 21’s to be scrapped in 2015
  • Rolling back green levies to allow an average saving of £50 on energy bills
  • Free school meals for infants
  • Scrapping of 1% above inflation rail fare increases
  • Electronic tax discs
  • Abolition of next years 2p per litre fuel duty rise

 

steve@bicknells.net

 

Loan Notes – A Seller’s Dilemma Reply

Retro Drama Woman

When you sell your company your buyer may wish to pay part in cash and part in loan notes to be paid off from future profits. The Loan Notes are known as Qualifying Corporate Bonds (QCB’s), the dilemma is whether to claim Entrepreneurs Tax at 10% now or pay full Capital Gains Tax later.

To obtain Entrepreneurs’ Relief on a disposal of the shares (the “old asset”) at the time of the exchange, the individual may make an election for the gain not to be deferred by TCGA92/S116 (10). The effect of an election is that the gain is brought into charge at the time of the exchange so that Entrepreneurs’ Relief can be claimed in order to benefit from the 10% rate – TCGA92/S169R (2).

In the absence of an election the gain is deferred and will be charged to CGT when it accrues under TCGA92/S116 (10) (b). It would be unusual for the qualifying conditions for Entrepreneurs’ Relief to be met at the later date when the gain comes into charge.

An election under this section, like the claim for Entrepreneurs’ Relief, must be made on or before the first anniversary of the 31 January following the tax year in which the relevant transaction takes place – TCGA92/S169R (4).

So would you claim the Entrepreneurs Tax Relief and pay 10% now or possibly pay 28% later?

You could try selling your shares in stages but that might not suit either you or your buyer?

steve@bicknells.net

 

5 reasons why your business should give you an IPad 1

Tablet

What do you use your IPad for? if you’re like me its for checking e mails and doing research related to business

So if its work related here are some great reasons why your business should buy it for you:

  1. Increased Productivity – If an IPad enables you and your team to work more effectively then why not start using them – Office 365 and Google Docs allow you to access your E Mails and Information easily any where any time
  2. Morale Boost – Getting a new IPad should improve morale
  3. Business Only – VAT – IPad’s and Tablets of all types are popular business tools and they are basically no different to a computer or laptop, if you can show that the IPad is necessary for work and there is only insignificant minimal private use then your business can reclaim the VAT, your business may set up a written policy to say that you can only use the the IPad for personal purposes in exceptional circumstances.
  4. Some Private Use –  in this case the business could still reclaim all the VAT if it charged you a hire charge for your private use of the IPad
  5. Capital Allowances – If its a business asset your business can claim capital allowances and reduce your tax bill

steve@bicknells.net

Are your businesses really separate for VAT purposes? 2

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

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