Remember Remember…the 31st January

The 31st January is the self assessment tax return deadline for both sole traders and partnerships. If you are the owner of a new sole trade or partnership you may not have submitted one of these tax returns yet, but don’t worry, we have all the information you need.

Why Sole Traders and Partnerships?

Sole traders and partnerships do not submit corporation tax returns every year like Limited companies would. The tax on your profits will not be directly charged to the business, the tax also will not appear on your financial statements, however it will be charged directly to you on your self assessment tax return.

So how will I be taxed on my profits?

Every year you will need to fill out a self assessment tax return in your name, this will have to include your business income and expenses and any other income you may have received personally. Basic rate for tax on profits is 20%, however if your profits reach above a certain threshold you may have to pay class 2 and class 4 national insurance. If you own a partnership then your profits will be split between the partners in accordance with your partnership agreement.

Other Useful Information

There are lots of things you may need to know when filling out a self assessment tax return but some things are a lot more common than others. Below I have listed some of the more common occurrences:
• Any tax you have paid through the payroll in another employment will be taken off your tax liability.
• Everybody will have a personal allowance which is £11,500 for 2017/18 tax returns, this will be taken off your overall profits and income before your tax liability is calculated.
• Any dividends received from other Limited companies will also need to be included on your tax return, however you will receive a separate dividend allowance on this, for the 2017/2018 tax year the dividend allowance is £5000

2018 Budget – Businesses

Whilst there was no immediate change to the current corporation tax rate of 19% there was confirmation of the intention to reduce the rate to Keith Roberts accountant Lancashire 17% from 1 April 2020. Something to look forward to!

For those businesses with significant investment in plant and machinery planned for the next couple of years, there was welcome news with the increase in the Annual Investment Allowance (AIA) to £1m for the two calendar years 2019 and 2020. It might therefore be worth considering delaying some expenditure to the New Year in order to qualify for AIA where your expenditure in 2018 already exceeds the present £200,000 limit.

Do you remember Industrial Buildings Allowances? These were phased out in the late noughties but it seems they have made a come back in the form of a new Structures & Buildings Allowance (SBA) which is introduced at a WDA rate of 2% on new non-residential buildings. This applies not only industrial buildings but also offices and farm buildings. It starts for all construction contracts entered into on or after budget day and is also available to commercial property landlords.

On the down side From April 2019 the plant and machinery that qualifies for special rate allowances will receive relief at 6% rather than 8% currently. This also applies to integral features of buildings.

Finally, for this blog at least, the £3,000 per year employment allowance will in future only apply to those employers with a NIC bill of less than £100,000 in the previous tax year.

Click here to see our full budget report.

For more detail on the contents of the budget click here.

If you have any questions about how the new budget may affect you and your business, please contact us on 01254 583515 or fill in the contact form below.

Paying Employer National Insurance Contributions for Apprentices Under 25

Paying employer National Insurance contributions for apprentices under 25

From 6 April 2016, if you employ an apprentice you may not need to pay employer Class 1 NI contributions on their earnings below £827 a week (£43,000 a year).

They must be under 25 years old and following an approved UK government statutory apprenticeship framework (frameworks can differ depending on the UK country).

You can check that your apprentice is in a statutory apprenticeship using the following link https://www.gov.uk/government/publications/removal-of-apprenticeship-framew…

Evidence needed

If your apprentice meets the conditions above, you’ll need to have evidence to be able to apply the relief. This can be either:

  • written agreement between you, the apprentice and a training provider
  • in England and Wales, evidence that the apprenticeship receives government funding

Written agreement must show:

  • the government apprentice framework or standard
  • a start and (expected) end date for their apprenticeship scheme

If the training provider hasn’t signed the written agreement, they’ll need to give you a document that shows:

  • they’re an approved (recognised) training provider
  • the training your apprentice is undertaking, and any training already done

Alternatively, in England and Wales, you can provide evidence of government funding of the apprenticeship. This could be the declaration to receive apprenticeship incentive payments, or the employer payment schedule to the provider.

You could be the employer and a trainer if you’ve been approved by the Skills Funding Agency in England, or hold a contract for the delivery of Apprenticeships in Wales.

NICs category letters to use.

Category letter: Apprentice conditions =H

Apprentice standard rate contributions – if your apprentice is under 25 and in an approved apprenticeship framework G or If your apprentice is a foreign-going mariner and is under 25

If your employee is under 21 and meets the same conditions as an apprentice under 25, use the H or G categories.

When the statutory apprenticeship stops or your apprentice turns 25 you’ll need to use a new catergory letter.

The apprentice rate only applies to payments which are liable for Class 1 secondary NICs.

What you can tell your employees

Employees will continue to pay the standard rate of Class 1 NICs through their salary. They won’t see any reduction in their payments. It’s employers who’ll benefit from this change.

The employee’s entitlement to contributory social security benefits, including the State Pension won’t be affected and neither will their entitlement to statutory payments. Existing employees may notice a change to the National Insurance category letter on their payslip.

If you have any queries about the above please get in touch on 01254583515 and we will be happy to help or fill in my quick contact form below and we will get back to you within the day.

Class 2 National Insurance – What You Need To Know

If you are self-employed and earn above the 2018/19 small profits threshold of £6,205 per annum then you are required to pay Class 2 National Insurance of £2.95 per week. The exact amount payable is determined when you complete your self assessment tax return and is paid alongside your income tax.

Class 2 NI entitles you to a state pension, maternity allowance, bereavement benefits, widowed parent’s allowance and short-term contributions based employment and support allowance.

Voluntary contributions can be made if your profits are below the threshold to ensure you remain entitled to the above.

What’s changing?

The Government’s original plan was to abolish all Class 2 completely from April 2018 which was then delayed until April 2019.

However, an announcement has been made this month (September 2018) by the Exchequer secretary to the Treasury that the Government will not proceed with the changes.

This is due to the fact that voluntary contributions to maintain access to state pension would need to rise substantially therefore negatively impacting on self-employed individuals with low profits.

There are currently no plans to reintroduce the abolition at this time.

If you have any questions about your self employment and national insurance contributions please fill out the form below or call us on 01254 583515.

Medical Profession – Pension Tax Trap

It’s that time of year again when we come round to preparing tax returns. We understand how complicated they can get.

One of our specialisms here at Egan Roberts is acting for clients in the medical profession.

Tax returns can be complicated enough to put together with a combination of practice or NHS income and then private income and looking at ways to minimise your liability. One way to reduce your liability used to be pension contributions, but over the years with the introduction of the lifetime allowance and limits to annual contributions this has become less of a tax planning opportunity.

How does my pension affect my tax?

Indeed it is now quite likely that your pension may be the cause of additional tax liabilities. For older members of the medical profession with a long period of service, you need to carefully monitor the value of your pension in comparison with the lifetime allowance, which presently stands at £1,030,000, increasing to £1,055,000 for 2019/20.

Where the whole of a lifetime allowance has been used by crystallisation events, the lifetime allowance charge will be applied at the rate of 25% on income (the income itself then being also taxed at your marginal income tax rate). For excess amounts taken as lump sums, the marginal rate is 55%.

 

In addition to the above tax trap, you also need to watch that your deemed pension contributions don’t exceed the Standard Annual Allowance which is £40,000 per annum. It is important that you pass to your accountant your NHS Annual Allowance Pension Savings Statement which will tell you your pension input amount for the year.

However, you should be aware that if you do exceed the Standard Annual Allowance, you may be saved from additional tax by the use of Carry Forward, where excess contributions can be offset against unused allowance carried forward from the previous three years.

Liked this blog? Read another here.

You became a doctor to be a doctor, not to run a business.

For help getting started with your tax return checklist, click here.

If you would like any help or advice regarding your self assessment tax return, call us on 01254 583515 and we’ll get in touch.

Making Tax Digital for Vat

Making Tax Digital. You may have heard of this?

If you have not and you are a vat registered business then you need to find out about this as soon as possible. Contact us on andrew@egan.co.uk

 

As from April 2019 all vat registered businesses will need to be able to submit their vat returns direct to HMRC using an approved piece of software. You will no longer be able to submit your return via the HMRC online login as you may currently do.

We at Egan Roberts are speaking to all our clients at the moment to make them aware of the above and checking what plans they have in place to be able to comply with the new rules from next April. Those clients that have a PC based piece of software (sage accounts etc) will need to make sure that their software is up to date and will be compatible with submissions to HMRC from next April. We can do this check for you.

There are however many businesses that either keep their software on spreadsheets or still keep their records manually. These businesses need to act now to be ready for the change in April 2019.

What options are there?

There are several options:

  • Upgrade your current PC based software so that it is compatible with the new HMRC submission criteria
  • Obtain a piece of software that links your spreadsheet to the HMRC online portal
  • Move to a cloud computing piece of software (Xero, Quickbooks or Sage Business Cloud Accounting)
What we recommend

We are recommending that our clients move to the cloud, there are numerous advantages to this, not least being that we as your accountant can login to your live data anywhere and deal with any queries you have.

How easy is it to set up?

The set up of Xero as an example is very easy.

  • We can send you a trial invite which lasts for 30 days if you are happy with the software you can use the standard chart of accounts set up which can easily be amended to suit your business.
  • You enter your opening balances – preferably from your last year end accounts.
  • You can then set up bank feeds which allows your bank to send through the transactions direct into the software. This makes reconciling your bank very easy.
  • You can add your logo so that if you generate sales invoices your logo appears on them and these can easily be emailed to your customers.
  • You add your purchase invoices in to the system so that the payments can be matched against these.
    We can of course help with all of the above
How do I do my Vat Return

Once all the transactions have been entered for the quarter you can generate your vat return from within the software and check all the transactions to make sure it is correct. You can then publish the vat return and submit it from within the software using your HMRC login details. Again if you would like us to do this we are able to login to do this for you.

What do I do now?

Do something now do not delay any further!

Get in touch and we will give you the best options for your business and guide you so that you will be able to submit your vat returns correctly from April next year.

Make your list and check it twice!

The Christmas markets opened this week, but what about January? You might not be thinking about it yet but your accountants are!

While your children sit down to start their lists to Santa, you should join them and complete your tax return checklist.

Running your business and planning Christmas leaves little time for all of that admin work…but the tax return deadline at the end of January will be here before you know it.

Complete your list now and you’ll have one less task to think about!

Not sure where to start? Here’s a simple list to help you on your way.

 

  1. Employment income
  2. Employment benefits e.g. car benefit
  3. Pension income
  4. Interest income
  5. Dividend income
  6. Property income and expenses
  7. Trade income and expenses
  8. Child benefit received
  9. Charitable donations
  10. Pension contributions

 

Read more on self-assessment here.

Every checklist is unique and personal to you. So if you would like some help or advice on completing yours, contact us on 01254 583515 or fill out the form below and we’ll get back in touch with you as soon as possible.

Investment Schemes: Company and Investor Perspectives

At Egan Roberts we provide year round tax advice on income tax, capital gains tax, inheritance tax trust and estates and non-domiciliary tax issues.
If you are interested in growing your business or making an investment, the below investment schemes may be available to you.

Enterprise Investment Scheme (EIS)

The company’s perspective

An EIS raises money for your company to help grow your business.

It offers tax reliefs to individuals who buy new shares in your company.

You can receive up to £5 million per year up to a company lifetime maximum of £12 million. However this does include any amounts received from other venture capital schemes.

Can my company apply?

If your company is less than 10 years old, has less than 250 full time employees and less than £15 million of assets, you may be eligible.

All conditions of application for EIS are set out here.

The investor’s perspective

An investor can receive the following incentives:

  • Income tax relief being 30% of the investment up to a maximum investment of £1 million.
  • Capital gains tax exemptions
  • Inheritance tax exemptions
  • Reinvestment relief
  • Loss relief

Note: If your income tax liability is lower than the 30% relief, you must relinquish the excess relief.

Seed Enterprise Investment Scheme (SEIS)

Similar to the EIS, if your company is less than 2 years old, has less than 25 full time employees and less than £200,000 of assets, you may be able to receive up to £150,000.

All conditions of application for SEIS are set out here.

The investor can receive income tax relief of 50% of their investment up to a maximum investment of £100,000.

Reinvestment relief, loss relief and capital gains tax relief are also available with a SEIS.

An overview of venture capital schemes for investors is available here.

If you would like to get in touch, please use the contact form below, visit our website www.egan.co.uk or call us on 01254 583515.

Getting prepared for the General Data Protection Regulation

From 25th May 2018, the new General Data Protection Regulation (GDPR) will come into force. It will affect any businesses which hold personal data on customers or employees based within the EU. The fines for non-compliance with the new law are up to €20m or 4% of your global annual turnover. Although that sounds scary, don’t panic! The information in this blog will help you in your preparations for GDPR compliance.

Holding Information

A good place to start is to document the following:

• What data you hold
• The reason why you hold it
• Who is responsible for it
• Where and how it is stored

Think about the data you wouldn’t want to be disclosed. The use of encryption will reduce the risk of data breaches. If the proper standards of encryption are used, it will for the most part render the data useless to an attacker.

Communicating Information

You will need to review your current privacy notices. With GDPR, when obtaining personal data you must give the following:

• Your identity
• Your intended use of their information
• Your lawful basis for processing the information
• Your data retention periods
• The individual has the right to complain to the ICO if they think there is a problem with how you are handling their data
All of this is usually expressed in a privacy notice.

Business-to-business emails should be targeted toweards a person’s role, not at the specific person.

Business-to-consumer emails however should be targeted to the individual providing you have consent prior to contacting them.

You musn’t email people who have been asked not to be contacted, unsubscribed or opted-out in some way.

Consent

Consent to process data must meet the GDPR standards of being ‘specific, granular, clear, prominent, opt-in, properly documented and easily withdrawn’.

Consent cannot be assumed from silence.

Access Requests

You will have a month to comply with access requests as opposed to the current 40 days.

For most requests, you cannot charge for complying with the request unless it is thought to be excessive.

If you refuse a request, you must tell the individual why and that they have the right to complain.

You should plan how you are going to deal with access requests and the right to be forgtten within the timescale.

Data Breaches

You will only need to notify the ICO of a breach if it is likely to result in a risk to the rights and freedoms of individuals; for example damage to reputation, financial loss or discrimination. In high risk situations, those directly involved must also be notified.

To reduce the impact of breaches, as well as the use of encryption, you should be prepared. Rehearse and have contingency plans in place for a worst case scenario.

Most importantly, inform everyone in your business of your new data protection policy.

Data Protection Officers

Your business needs a designated person to take responsibility for data protection compliance. They must have the knowledge, support and authority to carry out their role.

If you would like to contact us, please use the contact form below, call us on 01254 583515 or visit our website www.egan.co.uk

HMRC Investigations: What to Expect

Whether you are the chief executive of a multi-million pound company or a small business owner, HMRC may open an investigation if they suspect false reporting or underpayment of tax.

Triggers

Reasons for you or your business drawing the attention of HMRC are:

  • HMRC receives a tip-off
  •  your business regularly receives payments in cash
  • tax returns are consistently filed late
  • you operate in a sector HMRC has specifically targeted
  • you are randomly selected
Taxes

The taxes investigated by HMRC include but are not limited to:

  • Income tax
  • Capital gains tax
  • Corporation tax
  • Landfill tax
  • National insurance
  • VAT
Stages

There are three levels of an investigation; random, aspect and full.

As above, HMRC have the ability to choose to investigate your business completely at random.

An aspect investigation means HMRC is concerned about a particular part (or parts) of your accounts. This could include something as straightforward as forgetting to include all of your savings income within your self-assessment tax return. An aspect investigation can be upscaled to full at the discretion of HMRC.

A full investigation is when HMRC considers there to be a significant risk of error in your tax return. This would include a comprehensive review of your records including personal finance records as well as business-related.

The process

1. HMRC will initially contact you via letter or phone call with a query. They will specify what information they require for the investigation.

2. You will be expected to supply the information HMRC require which may include obtaining replacement copies of documents if you no longer have them.

3. Informing HMRC at this point of any mistakes you have knowingly made will benefit you further down the line.

4. HMRC will formally begin their investigation

What happens next?

Some common resolution include:

Underpaid tax

You will have 30 days to settle the underpayment with HMRC.

Failure to do so will result in a penalty ranging from 20% to 100% of the extra tax due.

The severity of the penalty depends on whether the underpayment was due to a lack of reasonable care, a deliberate error or deliberate and concealed errors.

Overpaid tax

If you have paid too much tax, HMRC may send you a rebate through the post.

If they do not, you will need to make a claim for a repayment.

Deliberate wrongdoing

If HMRC believe you have committed fraud, you may be subject to criminal proceedings.

You may also be charged a penalty depending on why you underpaid tax, how soon you informed HMRC of any mistakes and whether you were fully co-operative during the investigation.

Resolution

A decision notice will arrive in the post explaining the assessment and any penalty details.

Alternatively, HMRC may issue a contract settlement which legally binds you to pay the money that is owed to HMRC.

Tips to avoid an investigation

Nothing can prevent a random investigation but the following tips will help you to avoid becoming under HMRC’s microscope.

  • Maintaining accurate records
  • Putting money aside to cover your tax bill and pay it on time
  • File your tax returns accurately
  • Explain any changes or unusual transactions from one year to the next

If you are under HMRC investigation or have any questions please contact us via the contact form below or call us on 01254 583515.

Take a look at our blog outlining what accounting records you should keep.

Enquiry About My Tax

If you think there might be anything amiss with your Tax, or you’re setting up a new business and don’t want to get in any uncomfortable positions with HMRC, contact us for a free meeting to discuss your situation and how we may be able to help now and in the future.