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.

What Accounting Records Should I Keep?

As Chartered Accountants and Financial Advisors based in Lancashire, a question we often get asked here at Egan Roberts is what accounting records we need in order to complete your year end accounts and tax returns.

The most important thing is to be as organised as possible. Accounting software packages such as Xero make this much easier for you.

At Egan Roberts, we are all Xero Certified Advisors to help and support you through your Xero journey. Some may call us Xero Heroes.

Records must be kept for a minimum period of 6 years. Xero has the ability to digitally store images of your invoices and can feed directly through from your bank. This makes record keeping for such long periods of time much easier and will no longer clutter up your spare room!

If HMRC open a tax enquiry into your business within the last 6 years, Egan Roberts offer a fee protection scheme which acts as a type of insurance against any additional work we may need to undertake to assist with the enquiry. See our more detailed blog here for more information about this service.

If you would like to speak to us about any of the above, please call us on 01254 583515 or visit our website www.egan.co.uk

Converting to an Academy

One of our specialisms at Egan Roberts is acting for academies, but have you ever wondered how it all starts?

 

There are two types of academy; single academies and multi-academy trusts.

Firstly, to convert to a single academy the school’s latest Ofsted rating must be at least good, student’s attainment and progress must be high and finances must be healthy.
Alternatively, to convert to a multi-academy trust you can join an existing trust or set up a new one. All academies in the trust share staff and expertise and make savings on expenses.

 

However, before the school can apply to convert, the governing body must pass a resolution to convert. If applying to join an existing trust, the trust must confirm they are happy to accept your school.

 

The following steps must be completed to convert a local-authority-maintained school to an academy.

1. Prepare for your school’s application before you apply. It is recommended that you submit a registration of interest form and read the ‘Academies financial handbook’.
2. Complete the application form and notify your local authority
3. Set up or join an academy trust
4. Transfer responsibilities to the academy trust
5. Prepare to open as an academy including appointing officers and auditors, insurance and complaints procedures
6. In the first few months of being open as an academy, publish the final funding agreement on the academy’s website, submit the relevant financial returns, complete the land and buildings valuation within 6 weeks of converting and seek advice from peer-to-peer networks

Peer-to-peer networks include:

• Freedom and Autonomy for Schools – National Association
• The Schools Network
• Institute of School Business Leadership

 

More detailed information is available on the government website here.

Making VAT digital: What does it mean?

Is your business registered for VAT? Is your taxable turnover over £85,000? If you answered ‘yes’ to both of those questions then from 1st April 2019 your business needs to comply with the new Making Tax Digital VAT rules.

Filing your VAT return

Businesses must use a system which allows the VAT return information to be reported directly to HMRC. So any returns commencing 1st April 2019 cannot be submitted using your government gateway account.
Also software must be used which communicates with HMRC using an Application Programming Interface (API).
If your software is not compatible, you may be prevented from submitting your VAT return and could face penalties of up to 15% of VAT due.

Digital record keeping

VAT registered taxpayers covered by the Making VAT Digital rules will no longer be able to keep manual records.
For those who use a combination of software and spreadsheets, digital links must be in place by 1st April 2020 to transfer data between each function.

What software should I choose?

At Egan Roberts we are all Xero Certified meaning we are able to give you guidance and advice on how to use Xero to get the best results out of the software.

What accounting records should I keep?

With the changes coming into place putting a stop to manual record keeping, take a minute to read our blog on what accounting records you should be keeping.

If you would like any further information about Making Tax Digital or Xero software please contact us by filling in the form below, call us on 01254 583515 or visit our website www.egan.co.uk

How can you value your business?

There are various different ways to value a business. Each method will give a different figure from floor to ceiling values. This blog outlines a selection of valuation methods and in what circumstances they are most useful.

Asset basis

This is the value of the net assets of the business and is seen to be a ‘floor’ value. It is quick and easy to calculate however there are some drawbacks.
If your business uses historical costing as opposed to revaluation, historical depreciated costs do not necessarily reflect what the assets are really worth in their market. Also, this method doesn’t take into account the value of any intangible assets such as brands.

Dividend basis

This basis is useful for valuing minority shareholdings. The value of one share is calculated as the present value of future dividends being generated by the existing management team.
A cost of equity and estimated growth rate are required for the calculation so it is not as simple as the asset basis. Growth can be estimated based on historical dividend patterns or by calculating profit retention divided by reinvestment.

Cash flow basis

The cash flow method is more useful for majority shareholdings and will give a ‘ceiling’ value. The value calculated is the discounted value of the future free cash flows. Two different methods can be applied; free cash flows or free cash flows to equity.
Free cash flows is the after-tax operating (pre-interest) cash flows less net investments in assets. Whereas free cash flows to equity is the free cash flows less net interest paid.
The discounted value is to calculate what the future cash is worth in today’s terms.

Earnings basis

This method creates a market value using a price/earnings (P/E) ratio multiplied by the business’ earnings. Again, this method is useful for valuing majority shareholdings.
However, P/E ratios are only available for quoted companies. If you business is unquoted you would need to use a ‘proxy’ ratio i.e. an industry average or a ratio from a similar business to yours which is quoted. If you choose to do this, the ratio should be discounted as appropriate to reflect the fact that your business does not have the advantages of being on the stock market.

Hedging Foreign Currency Risk

Are you concerned about your exposure to foreign currency risk? This blog discusses the different derivatives available to reduce the risk of adverse currency movements.

Forward Contract

This is a bespoke contract to buy or sell foreign currency at a future date but at a fixed exchange rate. A forward contract will eliminate all downside risk and they are fairly easy to obtain.
These contracts are used to limit potential losses however this does also mean that no exchange gain would be made if the currency rates actually moved in your favour.
The other point to note is that everything about a forward contract is fixed being the date, the currency, the amount and the exchange rate. So if you find you no longer require it or want it for a different date, the original contract must still be adhered to.

Money Market Hedging

A money market hedge fixes the cost of a foreign payment by making a deposit in the spot market now; and fixes the revenue from a foreign receipt by borrowing in the spot market now. By depositing or borrowing prior to the payment or receipt, you are essentially fixing your own exchange rate.
This type of hedging may be useful if you are an importer with a cash surplus or an exporter with a cash shortage. However, money market hedges can be quite complicated and time-consuming to control so experience in this area would be advantageous.

Futures Contract

Similar to the forward contract where the future date and exchange rate are fixed. However unlike the forward, futures contracts are standardised amounts so you may have to under or over hedge.
A futures contract would require an initial margin deposit and also maintenance margin deposits.

Options

An option is the only derivative that gives you the right but not the obligation meaning if the markets move in your favour and you would have an exchange gain, you can decide not to exercise the option and take advantage of that gain.
This upside potential does come at a cost being a non-refundable premium, payable upfront whether or not you exercise the option.

Currency Swap

A currency swap uses interest rates with cash flows in different currencies. So you would make a loan in one currency and receive a loan in another currency.
This type of hedge involves another party as you are ‘swapping’ interest rate payments over the life of the agreement. However you are still liable for the principle amount of debt you have borrowed and are therefore exposed to counterparty risk if the other party does not complete the interest swap payments.