What is the optimum pay for business owners in 2018/19? Reply

Directors aren’t subject to Minimum Wage rules and if they are the only paid employee then they don’t need an auto enrolment pension.

So assuming they don’t get a salary from another job, it generally makes sense for Directors to be paid above the NI Lower Earnings Limit and below the Employee’s primary class 1 contributions level.

The LEL for 2018/19 is £116 per week and the Primary Threshold is £162 per week.

So that’s £6,032 to £8,424 per year.

Earning above the LEL means directors will qualify for certain state benefits.

If the company has other employees and they earn sufficient to incur national insurance then you could pay more to the director and take advantage of the Employment Allowance of £3,000 which offsets employers national insurance.

The personal allowance will be £11,850 for 2018/19, that’s how much you can earn tax free.

Higher rate tax starts when total earning hit £46,350.

The Dividend Allowance drops from £5,000 to £2,000 in 2018/19

steve@bicknells.net

 

How to succeed at Speed Networking Reply

Speed Networking is great fun, so don’t miss the chance to do it at our next BH Banter on Monday 5th March. To be successful at Speed Networking you need to do the following Prepare You will only have a couple of minutes to explain who you are, what you do and why people want […]

via How to succeed at Speed Networking — Bournemouth Chamber of Trade & Commerce

Does adopting CSR make you more profitable? Reply

Many businesses falsely believe that adopting Corporate Social Responsibility will make them less profitable but the evidence and expert opinion actual suggests the opposite.

The truth is that customers, suppliers and society as a whole are placing increased importance on CSR. This trend is likely to further increase as government spending is cut further and the uncertainty of BREXIT gathers pace.

The success of CSR depends on how you embrace it, here some approaches originally identified by McKinsey:

Pet Projects

These projects reflect the interests of the senior management but often don’t live up to expectations.

Philanthropy

Generally this type of CSR is donation based and tend to benefit society more than the company

Propaganda

This type of CSR is designed to enhance the company’s reputation, its often seen as type of advertising

Smart Partnering

These partnerships move beyond the three areas above and work to improve employment, quality of live and living standards. These partnerships are see as providing the highest benefits for Society and the Business.

steve@bicknells.net

Who cares about corporate social responsibility? — Bournemouth Chamber of Trade & Commerce Reply

Bournemouth Chamber of Trade and Commerce care! For us Social Responsibility encompasses Supporting Charities Supporting Employees Supporting Local Businesses If we want a sustainable, inclusive and successful local economy all three of the corner stones above are vital. Surely no one can deny the importance of the three areas of social responsibility we have outlined. […]

via Who cares about corporate social responsibility? — Bournemouth Chamber of Trade & Commerce

The Digital Records Trap – Will HMRC catch you out? Reply

Historically many companies have written up board minutes and in some cases declared dividends retrospectively at the end of year, but times are changing!

In the age of cloud accounting and making tax digital HMRC will know exactly when entries are posted and when documents are signed.

Unreliable records were a major factor in Dr Maqbool Baloch v HMRC, Dr Baloch a locum doctor was forced to pay £0.5 million in tax and penalties!

Dr Baloch tried to argue that he was employed via his Limited Company – KSM Medics Ltd – but the paperwork didn’t tie up – there were board minutes for meetings which HMRC could prove didn’t take place. As a result he was treated as Self Employed because he ticked a box that said he was self employed for his agency work even though Dr Baloch argued this was not a contract.

From April 2019 Making Tax Digital will apply to VAT, this will give HMRC access to real time information direct from your accounting records and time stamped.

In order to avoid problems preparing or extracting monthly accounts will mean dividends can be declared in the correct time periods.

steve@bicknells.net

 

Is TOMS an option for Serviced Accommodation VAT? Reply

TOMS is the Tour Operators Margin Scheme (VAT Notice 709/5).

It is a special scheme for businesses that buy-in and re-sell travel, accommodation and certain other services (see paragraph 2.9) as a principal or undisclosed agent (that is, acting in your own name).

TOMS does not apply to:
# supplies you have arranged as a disclosed agent/intermediary and your commission is readily identifiable (see paragraphs 2.14 and 6.7)
# in-house or agency supplies you make which are not packaged/supplied with margin scheme supplies (see paragraphs 2.12 and 2.13)
# supplies you make to business customers for subsequent resale by them (that is, wholesale supplies), or
# supplies that are incidental to your other supplies (see paragraph 3.6)

If you are registered for VAT, you must normally account for tax on the full selling price of your supplies, but you can reclaim the VAT charged on purchases (subject to the normal rules).

Under the TOMS, you cannot reclaim any UK or EC VAT charged on the travel services and goods you buy-in and re-supply – the tax on such goods or services is accounted for in the relevant Member State by the providers of those services (hotels, airlines and so on).
However, as a tour operator based in the UK, you only account for VAT on the margin you make on your margin scheme supplies (see paragraph 2.7), that is, the difference between the amount you receive from your customer (including any amounts paid on behalf of your customer by third parties) and the amount you pay your suppliers.

A margin scheme supply is defined in law (see paragraph 1.2) as a ‘designated travel service’.
This means it is a supply of goods or services which is:
bought in from another person and re-supplied without material alteration or further processing, and
supplied by a tour operator from an establishment in the UK, for the direct benefit of a traveller – see paragraph 2.8

The following are always margin scheme supplies:
# accommodation
# passenger transport
# hire of a means of transport
# trips or excursions
# services of tour guides
# use of special lounges at airports

The reason why this would be useful for Serviced Accommodation is because often its done on Rent to Rent basis and the landlord supplies Residential Accommodation (which exempt from VAT), Serviced Accommodation is Vatable (if you cross the £85k threshold), so the VAT bill would be lower using TOMS. However, its not like a normal tour operator, normally they would buy in holiday accommodation not residential accommodation!

So before using TOMS you should get prior approval from HMRC after full disclosure of all the facts.

Surely in these circumstances HMRC would want the original landlord to change the status from Residential to Holiday Accommodation so that they will become subject to VAT?

steve@bicknells.net

 

How much extra tax do Property Investors pay? 2

Recent tax changes such as Clause 24 Interest Restrictions, 3% extra SDLT and 8% extra Capital Gains Tax have hit landlords hard and these NLA videos explain the full impact

http://nla-video-graphic.s3-website-eu-west-1.amazonaws.com/

The NLA predict that the changes will mean that 20% of Landlords will sell their portfolios.

Since September lenders to Portfolio Landlords have been required to look at the whole portfolio before lending and this has lead to 70% of landlords with four or more properties saying that they have found it hard to obtain finance.

Overall Residential transactions have seen a slight decline in activity

Since 2015 more and more landlords have been using Limited Companies to purchase property investments even though mortgage interest rates are a around 1% higher there are many advantages:

  • Clause 24 Interest Rate Restrictions don’t apply to companies
  • Lenders can take a specific change and a debenture over a company and this is why separate companies for each investment can be an advantage
  • If you sell the company shares rather than the property the buyer will pay 0.5% SDLT on the shares, the capital gains tax on shares is 8% lower than on residential property and the potentially the company purchaser can takeover the existing debt without needing to refinance
  • Corporation Tax is 19% where as Landlords pay Income Tax rates, which means companies can help you to build a portfolio quicker as you retain more profit

steve@bicknells.net

 

 

Do you try to buy from local and UK suppliers? Reply

We are rapidly approaching BREXIT in March 2019 and its highly likely to cause currency fluctuations, that alone has to be a good reason to source products and services locally.

There are of course many other reasons such as:

  • Consumers are often prepared to pay for more locally sourced products
  • Its better for planet – why ship things hundreds of miles and pollute the planet if you can buy locally
  • It protects local jobs and services and helps the economy to grow

The Chartered Institute of Procurement and Supply reported

EU businesses say goodbye to UK suppliers as Brexit bites into key relationships
06 November 2017

Nearly two-thirds (63%) of EU businesses expect to move their supply chain out of the UK
Two-fifths (40%) of UK businesses are looking to replace their EU suppliers
25% of large UK businesses* have spent over £100,000 preparing their supply chains for Brexit
Nearly two-thirds (63%) of EU businesses who work with UK suppliers expect to move some of their supply chain out of the UK as a result of Brexit according to a survey from the Chartered Institute of Procurement & Supply (CIPS). This is a dramatic shift from May, when just 44% of EU businesses were expecting to move out of the UK.

So unless we start to support Local and UK businesses there could be significant consequence for the UK economy.

steve@bicknells.net

 

 

What if you don’t get your self assessment done in time? Reply

What if you don’t have all the information you need for the return?

Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.

A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure

An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used

HMRC SAM121190

Is there a reasonable excuse as to why you can’t file the return?

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

1. your partner or another close relative died shortly before the tax return or payment deadline
2. you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
3. you had a serious or life-threatening illness
4. your computer or software failed just before or while you were preparing your online return
5. service issues with HM Revenue and Customs (HMRC) online services
6. a fire, flood or theft prevented you from completing your tax return
7. postal delays that you couldn’t have predicted
8. delays related to a disability you have

What if you make a mistake?

If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it.

White Space

The Self Assessment Return contain additional information boxes, these are known as white space, use these spaces to explain your calculations if you have any doubt about the answers you have given

Penalties for Late Filing

  • 1st Feb 2018 – £100 for missing the deadline
  • 30th April 2018 – £10 per day for 90 days after your are 3 months late (£900 in total)
  • 31st July 2018 – 5% or £300 which is ever is greater if you are 12 months late
  • 31st Jan 2019 – £300 or possibly 100% of tax due if deliberate

On top of these penalties there are also penalties for non payment

steve@bicknells.net

Why do we leave Self Assessment Returns until the last minute? Reply

It seems to me that there are basically two types of taxpayer and the split is pretty even.

The first type are ‘Organised Planners’, they prepare things as early as possible, work out what tax might be due and how they will pay it, look at ways to change things and file early. They will always pay less tax because they have had a chance to consider their options – Pensions, Gift Aid, SEIS, EIS and other things that reduce tax – they also tend to have a full set of records neatly posted on their accounting system.

The second type are ‘Just in Time’, whatever the deadline, they put things off. The problem with this is that often this means things get forgotten and paperwork gets lost, there is no time to prepare or plan and the tax will be payable immediately.

The added problem this year is that Credit Card Payments are no longer an option

In 2016, personal credit card payments for tax numbered 454,000 making of total of £741 million and resulting in £3.2 million in bank fees.

These payments were largely made by small businesses, looking to manage bulk payments by putting them on a credit card that could then be paid off over time.

Below are some statistics from HMRC from 2012, but I think that little has changed and the statistics will be similar this year.

I don’t think anyone would say they enjoy paying tax or filling in forms, so in some ways you can understand why some people put it off and do it ‘just in time’.

Last year HMRC reported

29 January was the busiest day with 513,271 returns completed – that’s more than 21,386 returns received per hour. The busiest time was between 14:00 and 15:00, with 50,358 customers – 14 per second – clicking submit.

If you haven’t done your return, do it now, don’t wait till 11.59 on 31st January.

Steve@bicknells.net