What do you do in your garage? Reply

Most small businesses and employees do something in their garage.

The top choices being

Storage

In order to claim a tax deduction for using your garage for storage as part of your business or as an employee you will need to charge rent. If you don’t you will be taxed on it as PAYE.

To do this you will need a licence agreement between you and your company, the agreement might need to have some special rules in it depending on what is being stored including fire prevention and health and safety.

The rent then needs to be declared in the UK Property pages of your self assessment return.

You will be able to offset relevant costs.

 

Cars

Obviously garages are designed for cars and that’s often what they are used for.

Your company may require you to hire a garage to protect your company car and provided this is an employment condition the cost of hiring the the garage should be tax free, even if the employee pays and is reimbursed.

The employer should give the employee a letter insisting that for security reasons the car must be kept overnight in a garage.

So what are you doing in your garage?

steve@bicknells.net

 

What can you say in 10 seconds to promote your business? Reply

Bournemouth Chamber of Trade & Commerce

At our BH Banter evening networking events we are introducing the 10 second pitch.

I know that many groups have longer pitches but equally we know that some people find it hard to know what to say and it can be a source of worry and make people feel anxious, we want our members and guests to feel relaxed.

The purpose of networking is to generate business and grow your network, so what can you say in 10 seconds?

  1. Tell the group who you are – for example – Hi, I am Steve and my company is Bicknell Business Advisers
  2. What do you do, sell or promote? for example you might say something like… we help businesses to reduce costs, increase profit and minimise tax
  3. Why did you come to BH Banter? for example you could say – to learn new skills, make new connections, solve or get support with…

View original post 89 more words

The 1614D VAT Dilema Reply

As tax forms go, the 1614D to Disapply an Option to tax is probably one of the most straight forward.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/461545/vat1614d.pdf

The 1614D is used so that the seller won’t charge VAT when selling a building which has been opted to tax where the buy intends to convert to residential.

Basically it says – who are you, who is the seller and what is the property? – that’s nice and simple, what could possibly go wrong?

Its great for the purchaser as they don’t have to wait to recover the VAT.

The potential downside is for the seller, let say you originally bought the property for your business and only later decided to rent it out and Opt to tax. The issues are:

  1. Because its an exempt supply the seller can’t recover any VAT related to the sale
  2. The biggest potential problem is the Capital Good scheme which have a 10 year adjustment period, if you sell within this period you will have to pay back to HMRC some of the VAT

If you acquire or create an expensive capital asset, or already have one when you register for VAT, you may have to adjust the amount of VAT you reclaim. You do this by using the Capital Goods Scheme, which allows you to spread the initial VAT claimed over a number of years. You can reclaim more if the proportion of your taxable supplies increases, you’ll have to repay some if it decreases. Taxable supplies are the sales that you make which are standard, reduced or zero-rated.

You’ll have to use the Capital Goods Scheme if you spend £250,000 (excluding VAT) or more on:

  • buying land, a building or part of a building or civil engineering work
  • constructing a building or civil engineering work
  • refurbishing, fitting out, altering or extending a building or civil engineering work

Civil engineering work includes things like roads, bridges, golf courses, running tracks and the installation of pipes for connecting to mains services.

https://www.gov.uk/guidance/vat-capital-goods-scheme-and-capital-assets

steve@bicknells.net

 

 

 

No IR35 if there is common control Reply

IR35 is complicated set of rules that applies to contractors.

Many companies will award contracts to related and associated businesses, are these subject to IR35?

Paragraph 3(1) and (2) Schedule 12 Finance Act 2000 / Section 51(1) and (2)

Chapter 8 ITEPA 2003

Regulation 5(2)(a) SI 2000 No. 727

The conditions of liability are not met if the intermediary is an associated company of the client by reason of the two companies both being under the control of the worker, or the worker and one or more persons.

When considering who has control of both companies you have to consider the minimum irreducible shareholdings.

Example 1

Mrs J owns all of the shares in Holdco Ltd, which in turn owns all of the shares in Tradeco Ltd. She works for Tradeco Ltd under a service agreement between Tradeco Ltd and Holdco Ltd. Both client and intermediary companies are under the control of Mrs J so the conditions of liability are not met and therefore, the legislation does not apply.

Example 2

Mr K and Mr L each own 50% of the shares in Holdco Ltd and Tradeco Ltd. They both work for Tradeco Ltd under a service agreement between Tradeco Ltd and Holdco Ltd. Neither Mr K nor Mr L controls both companies on their own and both their shareholdings have to be taken into account in establishing control. Therefore Holdco Ltd and Tradeco Ltd are under the control of Mr K and Mr L. The conditions of liability are not met and no deemed payment arises.

Example 3

Ms M owns 60% of the shares in Holdco Ltd and Tradeco Ltd. Mr N and Mr O own a further 20% of the shares each. Ms M has control of both companies on her own. Therefore the conditions of liability will not be met with respect to her services. However, the exception will not apply to any services provided by Mr N and Mr O.

Example 4

Mr A, Mrs B, Mr C and Ms D who are unconnected each own 25% of the ordinary shares in both Holdco Ltd (intermediary) and Manuco Ltd (client). The following combinations could control both companies – Mr A, Mrs B and Mr C; Mr A, Mrs B and Ms D; Mr A, Mr C and Ms D; Mrs B, Mr C and Ms D. Consequently, in relation to each worker’s engagement, the companies are associated companies as they are both under the control of the worker and other persons.

Example 5

Mr A, Mrs B, Mr C and Ms D who are unconnected each own 25% of the ordinary shares in Holdco Ltd (intermediary) but Mr A, Mrs B and Mr C each own one-third of the ordinary shares of Manuco Ltd (client). The combinations which could control Holdco Ltd are as shown in Example 4 above. The combinations which could control Manuco Ltd are Mr A and Mrs B; Mr A and Mr C; and Mrs B and Mr C. As none of these combinations control Holdco Ltd the companies are not associated companies for the purposes of the legislation.

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm8050

steve@bicknells.net

FRS102 Directors Loan rules to be simplified Reply

FRS102 which is now the UK’s main reporting standard has some really odd rules and in my view the rules for interest free loans are complete madness!

Take a simple example of a £5,000 interest-free loan repayable in three years’ time:
if the market rate for such a loan was, say, 7% then the present value of the loan would be £4,081 (£5,000 x 1/(1.07)3).

Unfortunately, FRS 102 does not contain any requirements about how the above financing shortfall of £919 should be accounted for on initial recognition. It is therefore necessary to consider the particular facts in order to determine the accounting treatment.

In simple terms, the financing shortfall of £919 is either interest income or an interest expense when the loan is made. That then reverses as interest receivable or payable as the discounting unwinds.

– See more at: http://www.icaew.com/en/members/practice-resources/icaew-practice-support-services/practicewire/news/frs-102-and-interest-free-loans#sthash.tm8iReHG.dpuf

This is crazy, because we all know the value of the loan is £5,000, it’s not £4,081!
It looks like the FRC now agree and we are getting FRED67 to amend the rules for Directors
Basically the new rules will allow loans to be reported at the their transaction value rather than their fair value, in other word we don’t need to assess notional interest.
FRED 67[2] proposes a number of amendments to FRS 102, in response to calls from stakeholders, intended to simplify it and make it more cost-effective. This includes permitting small entities to initially measure a loan from a director who is a natural person and a shareholder in the small entity (or a close member of the family of that person) at transaction price. FRS 102 currently requires such loans to be initially measured at present value, with the discount rate being a market rate of interest for a similar debt instrument.
This does of course still leave us with the old rules for inter company loans and loans from directors who aren’t stakeholders, but hopefully the FRC will bring in further simplifications.

What information will you need to report under Making Tax Digital (MTDfB)? Reply

Once the election is over, Making Tax Digital will be pushed forward again, ready for its launch in April 2018.

If you aren’t using any software or apps to prepare your accounts, now is the time to start. Under MTDfB – Making Tax Digital for Business – Sole Trader, Partnerships, Landlords and ultimately Companies will need to file returns every quarter and submit a final year end return.

This what you will need to report

The categories of information listed below are being reviewed and have not yet been finalised. They have been included mainly for indicative purposes.

https://www.gov.uk/government/publications/bringing-business-tax-into-the-digital-age-legislation-overview/bringing-business-tax-into-the-digital-age-legislation-overview#schedule

Non-property businesses

Income:

  • turnover, takings, fees, sales or money earned
  • any other business income

Expenses:

  • cost of goods bought for resale or goods used
  • construction industry – payments to subcontractors
  • wages, salaries and other staff costs
  • car, van and travel expenses
  • rent, rates, power and insurance costs
  • repairs and renewals of property and equipment
  • phone, fax, stationary and other office costs
  • advertising and business entertaining costs
  • interest on bank and other charges
  • bank, credit card and other financial charges
  • irrecoverable debts written off
  • accountancy, legal and other professional fees
  • depreciation and loss/profit on sale of assets
  • other business expenses
  • goods and services for your own use
  • income, receipts and other profits included in business income or expenses but not taxable as business profits
  • disallowable element for each category

Property businesses

Income – furnished holiday lettings:

  • rental income and any income for services provided to tenants

Expenses – furnished holiday lettings:

  • tax taken off income
  • rent paid, repairs, insurance and cost of services provided
  • loan interest and other financial costs
  • legal, management and other professional fees
  • other allowable property expenses
  • private use adjustment
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • property repairs and maintenance
  • costs of services provided, including wages

Income – property:

  • rental income and other income from property

Expenses – property:

  • tax taken off any income from total rents
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • rent, rates, insurance, ground rents etc.
  • property repairs and maintenance
  • loan interest for residential properties and other related financial costs
  • other loan interest and financial costs
  • legal, management and other professional fees
  • costs of services provided, including wages
  • other allowable property expenses
  • private use adjustment

Partnerships

Interest and alternative finance receipts without UK tax deducted:

  • interest and alternative finance receipts from UK banks and building societies paid without tax deducted
  • interest distributions from UK authorised unit trusts and UK open-ended investment companies and investment trusts
  • income from National Savings and Investments
  • other untaxed income from UK savings and investments (except dividends)

Interest and alternative finance receipts with UK tax deducted:

  • other taxed income from UK savings and investments (except dividends) (amount net of tax deducted)
  • tax deducted

Dividends:

  • dividends and other qualifying distributions from UK companies
  • tax credits attached to such dividends etc
  • dividend distributions from UK authorised unit trusts and open-ended investment companies
  • tax credits attached to such distributions
  • stock dividends from UK companies
  • tax credits attached to such stock dividends
  • non-qualifying distributions and loans written off
  • tax credits attached to such distributions etc

Other income received without UK tax deducted:

  • other income – profit
  • other income – loss

Other income received with UK tax deducted:

  • other income (amount net of tax deducted)
  • tax deducted

Partnerships – end of year information

Disposal of capital assets – partnerships:

  • description of assets
  • whether listed or unlisted shares or securities (if applicable)
  • name of partners who benefited from the disposal proceeds
  • total proceeds from disposal

End of year information

Tax adjustments and elections:

  • adjustment required where the basis period is not the same as the accounting period under section 203 of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005
  • averaging adjustment applied to taxable profits where an election has been made for averaging under section 222 or 222A of ITTOIA 2005
  • adjustment required as a result of a change in basis under Chapter 17 of Part 2 of ITTOIA 2005
  • total of any construction industry scheme deductions taken from payments made to subcontractors under section 61 of Finance Act 2004
  • any other tax deducted from trading income (excluding deductions made by contractors on account of tax)
  • sums due to be charged under sections 277 to 285 of ITTOIA 2005
  • adjustments required under Chapter 7 of Part 3 of ITTOIA 2005
  • claims for loss relief under Chapter 2 of Part 4 of the Income Tax Act 2007 (Chapter 4 for property businesses)
  • disallowable expenditure
  • foreign tax deducted
  • any other tax adjustment
  • adjustment on change of basis
  • foreign tax deducted

Capital allowances – claims and balancing charges:

  • annual investment allowance
  • capital allowances at 18%
  • capital allowances at 8%
  • restricted capital allowances on cars costing more than £12,000 where bought before 6 April 2009
  • business premises renovation allowance
  • enhanced capital allowances: energy-saving relief
  • enhanced capital allowances: environmentally-beneficial relief
  • enhanced capital allowanced: electric charge-points
  • enhanced capital allowances: gas refuelling equipment
  • allowances on sale or cessation of businesses use (where an asset has been disposed of for less than its tax written down value)
  • total capital allowances
  • balancing charge on sale or cessation of business use (where business renovation allowance has been claimed)
  • balancing charge on sales of other assets or on the cessation of business use (where an asset has been disposed of for less than its tax written down value)

 

steve@bicknells.net

Have you tried Topcashback and Quidco for business purchases cashback? Reply

Topcashback have 6 million members and Quidco 7 million, so they are well established platforms and free to join.

Cashback sites are a simple idea. Instead of going directly to a shop, you access a retailer’s online store through a link from a cashback website.

You still receive your item directly from the retailer, but you also get some money from the cashback website.

It is often a percentage of the total price you paid.

The sites have links to retailers of everything from groceries and toiletries, to insurance policies and broadband deals.

http://www.bbc.co.uk/news/business-18207304

Nobrainers explain the process

  1. Signup to a Cashback Website, the most popular ones are Topcashback and Quidco but there are many other smaller ones too. If you sign up through us, you’ll get additional signup bonuses! (do it now!)

  2. Search and compare products to buy online just as you normally would, for example, you might do a Google product search, or look on Kelkoo, for a CD, book, Furniture, anything.

  3. Choose the merchant you would like to purchase this item from, for example, you’ve done a search for Widgets and deciced to but then from WidgetsRus

  4. Now the clever bit, instead of going direct to widgetsRus, visit your cashback site first, eg. Topcashback, and search the site of several thousand Merchants for ‘widgetsRus’

  5. If you’re in luck, you’ll find the amount they will give you (usually a percentage) cashback on whatever you spend at widgetsRus. Click on their link, and it takes you direct to widgetsRus, where you complete your purchase.

  6. Once the purchase is complete (usually within 24 hours), you will get an email from the cashback website saying they successfully tracked my purchase.

  7. Usually within 1-3 months the money arrives in your cashback account which you can able to withdraw at any time. simple as that!

Indicator recently reported that you could get £75 to £80 back on business insurance or save around 12% on booking via Expedia.

steve@bicknells.net

Do you have any cash in reserve? 6m UK families don’t! Reply

I was watching the BBC news this morning and in the Reality Check report they were talking about Debt.

Obviously the biggest amount of debt is mortgages and compared to other countries we are close to the average for Debt.

But its not just an issue for families its an issue for businesses too. We often work with landlords and typically their net cash flow out of the rent received is 2% or less.

That’s the Rental Income less mortgage interest, expenses and tax.

Landlords tend to be asset rich and cash poor, liquidity is vital to cover even minor problems such as repairs and void periods. It is of course easier to have liquidity with a bigger portfolio.

Landlords are facing many problems at the moment not least the Section 24 Interest Restrictions which start this year. This will mean large numbers of landlords with high Loan to Value ratios will have negative cash flow and if the sell they face 18% to 28% capital gains tax (as buy to let get an 8% penalty).

I wonder how many landlords have the resources to handle negative cash flow, how long could they cope what are their contingency plans?

The Lenders and Bank of England have anticipated this problem and for sometime now have tightened the lending rules coverage is now 145% for personal borrowers, but its still 125% for companies as they are aren’t affected by Section 24.

Now is the time to work on your strategy!

steve@bicknells.net

 

Tax and Performers – what can you claim? Reply

Most people don’t like doing accounts and actors, singers, musicians, dancers and performers are no exception.

Making Tax Digital will mean they will need to be on top of their expenses in order to do quarterly returns from April 2018.

Here is quick summary of claimable expenses.

Section 352 Limited deduction for agency fees paid by entertainers

(1) A deduction is allowed from earnings from an employment as an entertainer for agency fees (and any value added tax on them) if the fees are calculated as a percentage of the whole or part of the earnings from the employment.

This is subject to the limit in subsection (2).

(2) Amounts may be deducted under this section in calculating the net taxable earnings from an employment in a tax year only to the extent that, in aggregate, they do not exceed 17.5% of the taxable earnings from the employment in the tax year.

(3) Subsections (4) and (5) apply for the purposes of this section.

(4) “Entertainer” means an actor, dancer, musician, singer or theatrical artist.

(5) “Agency fees”, in relation to an employment, means—

(a) fees paid under a contract between the employee and another person, to whom the fees are paid, who—

(i) agrees under the contract to act as an agent of the employee in connection with the employment, and

(ii) at the time the fees are paid is carrying on an employment agency with a view to profit, and

(b) fees paid under an arrangement under which a co-operative society or the members of such a society agree to act as the employee’s agent in connection with the employment.

(6) For the purposes of subsection (5)—

“co-operative society” does not include a society which carries on or intends to carry on business with the object of making profits mainly for the payment of interest, dividends or bonuses on money invested or deposited with or lent to the society or any other person, and

“employment agency” has the meaning given by section 13(2) of the Employment Agencies Act 1973 (c. 35).

http://www.legislation.gov.uk/ukpga/2003/1/section/352

Trade and Magazine Subscriptions

You can claim for:

  • trade or professional journals
  • trade body or professional organisation membership

Travel & Subsistence

The normal rules apply https://stevejbicknell.com/2017/03/27/what-are-the-rules-on-subsistance-and-travel/

Travel to auditions, rehearsals and performance related activities should all be claimable.

Car Mileage can also be claimed at 45p for the first 10,000 miles then 25p per mile

Clothing and Costume Cleaning

If the clothing is for a performance then it should be fine but if used for personal use it has duality of purpose and can’t be claimed.

Generally rehearsal clothes can’t be claimed.

If the clothing counts as for a performance then the cleaning costs can be claimed

Other things

Tickets to events, shows, movies and museums may be claimable if they are for research purposes.

Props and equipment, even Ipads and computers could also be business expenses.

Websites, marketing, photography can all be business expenses.

Working form Home can also be claimed https://stevejbicknell.com/2015/02/02/simplified-expenses-working-from-home/

Also Mobile phones, stationery, insurance, accountancy and many more

 

steve@bicknells.net