Demystifying the Domestic Reverse Charge VAT

From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

Check when you must use the reverse charge on your sales, purchases or both.

  1. Find out how the charge works if you supply services.
  2. Find out how the charge works if you buy services.
  3. Read more detailed guidance about the reverse charge.

There will also be an amendment to the original legislation, which was laid in April 2019, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users or intermediary suppliers.

The Domestic Reverse Charge VAT  is a big change being implemented in the way VAT is being collected in the building and construction industry.

This has been set up to tackle fraud. This will mean that fraudsters will no longer be able to set up a construction business, charge VAT to customer then disappear before paying the VAT to HMRC. This practice is known as missing trader fraud and the change means that the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier. It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers).
This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

We would like to draw your attention to the details on the HMRC website which states the following –
You need to prepare for the  introduction date by:
• checking whether the reverse charge affects either your sales, purchases or both
• making sure your accounting systems and software are updated to deal with the reverse charge
• considering whether the change will have an impact on your cashflow
• making sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate,

What contractors need to do
If you’re a contractor you’ll also need to review all your contracts with sub-contractors, to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers if it will.

What sub-contractors need to do
If you’re a sub-contractor you’ll also need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.

The reverse charge does not apply to consumers or final customers of building and construction services. Any consumers or final customers who are registered for VAT and Construction Industry Scheme will need to ensure their suppliers do not apply the reverse charge on services supplied to them.

For reverse charge purposes consumers and final customers are called end users. They are businesses, or groups of businesses, that do not make onward supplies of the building and construction services in question, but they are registered for CIS as mainstream or deemed contractors because they carry out construction operations, or because the value of their purchases of building and construction services exceeds the threshold for CIS.

Services affected by the domestic reverse charge
The reverse charge will affect supplies of building and construction services supplied at the standard or reduced rates that also need to be reported under CIS. These are called specified supplies.
There is an important difference between CIS and the reverse charge where materials are included within a service. The reverse charge applies to the whole service whereas CIS payments to net status sub-contractors are apportioned and no deductions are made on the materials content.
The reverse charge does not apply if the service is zero rated for VAT or if the customer is not registered for VAT in the UK.

It also does not apply to some services.

These are those supplied to end users or intermediaries connected with end users. Find out more found in the End users and intermediary supplier businesses section.
Employment businesses who supply staff and who are responsible for paying the temporary workers they supply, are not subject to the reverse charge. Read the Applying the domestic reverse charge for construction services to certain sectors or types of transactions section for more information.

You will have to apply the reverse charge if you supply any of these services:
• constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
• constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours
• pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
• installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
• internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
• painting or decorating the inside or the external surfaces of any building or structure
• services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

For more detailed information please visit the HMRC website or give us a call to check what you need to do if you are affected by this change. Click here

Please also see our graphic below which explains this in simple terms!

Posted in Website Blog | Tagged constructionaccounts, domestic reverse charge vat, vat

The tax rules of Christmas gifts and celebrations

Its the end of year and it has been a tough one! So its important to treat your clients and staff with some festive Christmas treats. But even though its Christmas HMRC still have rules which are applied to giving gifts.  Here we clarify the essential information on the tax rules of Christmas gifts and celebrations. We have detailed below how gifts can be given and the tax implications so you can remain compliant and not get a nasty surprise in your Christmas Stocking!

Christmas Cards

You can send Christmas Cards as a tax-deductible expense. Many companies do not send cards in favour of donating to a charity. Your limited company can pay less Corporation Tax when it gives money to a charity or community amateur sports club (CASC). Deduct the value of the donations from your total business profits before you pay tax. Find more information here on donating to charity.

A £50 gift to yourself and your staff!

If you are a Limited company, then you can give yourself a gift at Christmas as the company is giving the gift and not you! You can also give gifts to your employees. The limit is £50. This counts as a trivial benefit exemption so no Tax or NI is payable. But this does not apply to cash – so it must a gift. Non-cash vouchers up to £50 may be exempt under the trivial benefit rules. Where the voucher exceeds £50, you will need to report these on a P11D form to HMRC.  So, a couple of bottles of wine and some chocolates would count as a trivial benefit. Unfortunately, gifts to employees are not a tax-deductible expense for the business.

If you spend more than £50

Buying a gift that costs more than £50 (and this includes delivery charges) will count as a taxable perk for the employees that receive it. They will then have to pay tax and you as the employer will have to pay National Insurance. For example, if you were to give a £60 gift it will cost you a total of £85 because of the tax and NI due.

The gifts must carry a clear advertisement for the business (e.g. with branding or logo) which must be on the gift itself, not just the wrapping. They can’t be alcohol, food, drink, tobacco (unless they are your business) or vouchers. Non-promotional gifts and larger gifts are classed as entertaining and are not tax-deductible as an expense.

VAT and gifts

If you are not using the Flat Rate Scheme you are able to reclaim the VAT incurred on purchasing the gift.

But you may, however, have to account for VAT on the value of the gifts if the gifts received by the recipient are more than £50 in a year. If a gift is exempt or zero-rated (i.e. a book) you will not have to account for the VAT.

Gifts for your clients – direct tax deductions

The gifts must carry a clear advertisement for the business (e.g. with branding or logo) which must be on the gift itself, not just the wrapping. They can’t be alcohol, food, drink, tobacco (unless they are your business) or vouchers. Non-promotional gifts and larger gifts are classed as entertaining and are not tax-deductible as an expense.

Cash bonus

Any cash you give to employees as a Christmas bonus counts as earnings, so you’ll need to:

-Add the value to your employee’s other earnings

-Deduct and pay’ Pay As You Earn’ (PAYE) tax and Class 1 National Insurance through payroll

Virtual Christmas Party

As work parties have been cancelled this year HMRC will still let you have a virtual Christmas party and you can still have the £150 allowance per employee.

The costs can include food, drink, virtual pantomimes, online entertainment events and postage costs.  The full details are here.

This online event must be made available for all staff to attend. The VAT is reclaimable, but only for the staff costs, not partners.

Salary sacrifice arrangements

You do have to report how much social functions and parties are worth to each employee if they are a part of a salary sacrifice arrangement.

But we have no employees just directors!

If your business does not have employees but just one of more directors, then the rules are different. The cost of providing entertainment only to directors or partners does not qualify for tax relief or VAT deduction

If the event takes place away from the usual place of work and as part of a business trip, for example, to see a client, then the meal would be eligible.

Any VAT suffered on the cost of travel, accommodation and meals can be reclaimed. The rules for tax relief would mirror this, and this also applies to employees, sole traders, partners, and subcontractors who are part of the team and treated as employees.

 Be less Scrooge at Christmas!

As an additional staff benefit which costs nothing and attracts no tax, why not allow an extra half a day’s holiday for Christmas Shopping?

-Consider extra time off to allow parents or grandparent to watch the school play.

-Maybe you could arrange a team- building day with a local charity to help at a Christmas event in your area.

-This all adds to building staff morale and shows you are a caring employer!

 

Needs more help and advice?

Call us to check if your circumstances do not fit what we have discussed in this blog. We are always happy to help.

There are some useful links to the HMRC website here –

Expenses and benefits: gifts to employees

Expenses and benefits: entertainment 

Specific deductions: entertainment: gifts: overview

 

Posted in Website Blog | Tagged christmas gifts and tax, christmas giving, tax at christmas

Rishi Sunak’s Summer statement

Rishi Sunak’s Summer statement

This is a summary of Rishi Sunak’s Summer statement 2020 which details the support and changes which will be taking place over the coming months.

Support for businesses

Several support measures have been announced by The Chancellor, Rishi Sunak, to support employers and employees These new measures are designed to support businesses and to protect jobs. There is a drive by the Government to support youth unemployment and give support to the economy.

Job retention bonus

The Government will pay a one-off bonus of £1,000 to employers for each of their furloughed employees who returns to work and remains continuously employed until 31 January 2021.

To be eligible for the bonus, the employee must have been paid an average of £520 per month between November and January.

Full details of the scheme are expected at the end of July.

Furlough Scheme

Coronavirus Job Retention Scheme will finish at the end of October 2020 and will not be extended.

New ‘kickstart’ jobs scheme

To assist with youth unemployment, the Chancellor announced a ‘kickstart’ plan.

Employers will receive funding if they create a new job with a minimum of 25 hours per week for a person aged between 16 and 24-years-old who is at risk of long-term unemployment and claiming Universal Credit.

The available funding will pay for the employee’s National Minimum Wage for 25 hours a week (plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions) for six months.

Employers will be required to provide training to the new employee and support them in gaining a permanent role. The scheme will run from August 2020 with jobs expected to start in the Autumn.

 Apprenticeships and traineeships

From August 2020 to January 2021, the Government will pay employers to create new apprenticeships.

Employers will be eligible to receive £2,000 for each new apprentice they hire who is under the age of 25 and £1,500 for each new apprentice aged 25 or over. This is in addition to the existing £1,000 payment the government already provides for new 16 – 18-year-old apprentices and those aged under 25 with an Education, Health and Care Plan.

The Government also plans to triple participation in traineeships by funding employers who provide trainees with work experience at a rate of £1,000 per trainee.

Stamp Duty

There has been a temporary change in Stamp Duty to try and ignite the housing market. Until now, in England and Northern Ireland, stamp duty has been paid on land or property sold for £125,000 or more. There are different rates and systems in Scotland and Wales.

Buyers usually pay their duty based on the price on the day the sale is completed and pay HM Revenue and Customs within 14 days. This threshold in England and Northern Ireland will increase – with immediate effect – to £500,000 until 31 March.

Eating out and going away in the UK

The sales tax – VAT – included in the cost of food, accommodation and attractions will be cut until mid-January from 20% to 5%

VAT will be charged at 5% (rather than 20%) from 15 July 2020 to 12 January 2021 on the following supplies:

  • food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises; and
  • accommodation and admission to attractions across the UK.
  • The temporary cut should see prices fall when eating out or going out which it is hoped will encourage people to go out to restaurants.

Further details to be released by HMRC

Introduction of “Eat Out to Help Out” scheme.

In a further measure to encourage consumers back to bars and restaurants this scheme will entitle every diner to a 50% discount on their meal, up to £10 per head (including children). There will be a list of participating restaurants, cafés, pubs or food service establishments. These businesses will be reimbursed fully for the discount applied.

The discount can be used an unlimited amount of times, but it is only available Monday to Wednesday during August. It applies to any eat-in meal and includes non-alcoholic drinks.

Qualifying Business will need to register to reclaim the value of the discount.

Home improvements

A scheme, which starts in September, the government will pay at least two-thirds of the cost of home improvements that save energy. This will be paid as a voucher when the work is approved.

 

We will update when more details become available but do call us if you need any help with your accounting or tax advice. 

Click here to contact us

Posted in Website Blog | Tagged Furlough Scheme, Job retention bonus, New ‘kickstart’ jobs scheme, Rishi Sunak's Summer statement, summerstatement

Payroll doesn’t have to be painful

 

payroll services

Our Payroll services mean this doesn’t have to be difficult or painful!

As soon as your business employs somebody, you need to meet your obligations as an employer. Payroll Services will be one of the aspects to consider. This affects anyone who employs at least one person – including individual directors who pay themselves via their limited company.

Payroll isn’t confined to limited companies. Services are needed when sole traders and partnerships employ someone too.

Good news! Payroll can be much easier than you think!

Payroll is More Than a Payslip!

Of course, paying employees is the main goal of payroll services. But – it’s paying everyone the right amount that counts. There are several aspects to take care of:

Deductions
There are laws and legislation which dictate how much Income Tax and National Insurance should be deducted from each person’s salary and paid to HMRC.

Pension Contributions
You need to pay the correct contributions on time to your staff pension scheme. If you don’t, you risk being fined by the regulator. Current pension contribution for employers is at 3% for employers and 5% for employees with no further changes expected. For more details on pension contributions visit the pension regulator website here.

Employee Changes
From new joiners to leavers and employees on sick/maternity/paternity leave… staff changes can affect the payroll system operating within the business. You need to be aware of the current requirements and levels at all times.

Payroll can be run weekly/fortnightly/monthly depending on the needs of your business. Linked to payroll services, we can offer advice for directors of companies about taking tax efficient wages alongside dividends.

Payroll and Beyond

Many businesses especially value the services beyond the number crunching. Our clients enjoy peace of mind due to the extra support that’s available from our Payroll Services team, such as:

Pension Schemes
We can provide full support and help to set up your pension scheme, including:
– providing letters and information to your staff about your auto-enrollment
– enrolling employees in the chosen pension scheme and completing your compliance
declaration – which is a legal requirement
– updates on changes with the workplace pensions

PAYE Updates and HMRC Advice
You’ll receive monthly information regarding PAYE and National Insurance amounts due. Plus we offer support and advice about how to make payments to HMRC in the correct time frame to avoid penalties. Plus, we’ll provide P45’s and P60’s when required.

Employment Allowance Claim – up to a maximum of £4,000 for 20/21 tax year. ( This was £3000.00) 
Employers are entitled to claim £4,000 allowance each tax year. This allowance helps towards your contributions reducing payments throughout the year. Are you claiming yours? More details here 

HMRC Liaison
Do you need to raise a query with HMRC? Maybe ask questions about reclaiming statutory payments such as Statutory Maternity Pay? Or have queries regarding PAYE payments and account details? Help is at hand! We will call HMRC on your behalf with any queries regarding your payroll scheme.

Real Time Information Reporting (RTI)
RTI was introduced in April 2013 – the largest change to PAYE since it was first introduced in 1944. We track and send submissions to HMRC ensuring they are sent on time in line with RTI requirements. This is a legal requirement of employers and if PAYE information is not reported on time it is subject to penalties.

Legislation Updates
Notification of changes in the law like the change in minimum wage rates and ensure that as an employer you are in line with the law. We will keep you updated.

Current rates for the minimum wage are –

25 and over £8.72 £8.21
21 to 24 £8.20 £7.70
18 to 20 £6.45 £6.15
Under 18 £4.55 £4.35
Apprentice £4.15 £3.90

For more information visit this page 

Why Outsource Payroll?

To save money and time! These are the key reasons that clients ask us to look after their payroll. Involving our expert support also offers you tremendous peace of mind. Outsourcing ensures that your business:
– complies with current legislation
– avoids late filing penalties
– operates a Payroll system that is accurate and correct
– receive full support with payroll – from wage slips to leavers and starters as well as pensions
and payments to HMRC

At Spicer & Co, we believe that every business is unique. Talk to us about our Payroll Services, without obligation. We will offer a flexible and tailored payroll package that allows peace of mind with friendly experts on hand for any questions or queries.

If you are based in the Dunstable, Leighton Buzzard, Houghton Regis or Luton areas, call us to arrange a no obligation discussion on our payroll services.

Posted in Website Blog | Tagged bedfordshire payroll services, payroll, payroll services, payroll services dunstable

Government Support Update

Three major changes to support due to the Corona Virus pandemic have been announced today, 29th May 2020 by the Chancellor Rishi Sunak.

Employers to start paying share of furlough scheme

Furloughed workers will continue to receive 80% of their pay, but from August it will include a growing employer contribution. It will start with employers paying NI and pensions in August, plus 10% of pay in September, rising to 20% in October.

During August the government will pay 80% of wages up to a cap of £2,500. Employers will have to pay NI and pension contributions. For the average claim, that’s 5% of the gross employment costs the employer would have incurred had the employee had not been furloughed.

In September, the government will cut its grants to 70% of wages up to a cap of £2,190. Employers will pay NI and pension contributions and 10% of wages to make up the 80% total up to a cap of £2,500. That works out at 14% of the average gross employment costs the employer would have incurred.

In October the government grant will be cut to 60% of wages up to a cap of £1,875. Employers will pay NI and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500. That’s 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.Fl

Flexible Furlough Scheme Announced

From 1 July 2020 businesses will be allowed to bring furloughed employees back part-time, a month earlier than previously announced. The move is aimed to help support people back to work.

It will be down to individual firms to decide what part-time means. They will be able to set the hours and shift patterns staff will work when they return, but companies will have to pay 100 per cent of wages while they’re in work. The rest of their salary can be claimed via the furlough scheme up to the allowance as per the details above.

The Self Employed Income Support Scheme Extended

Those eligible for the Self-Employment Income Support Scheme (SEISS) will be able to claim the additional grant in August, which will be worth 70% of their average monthly trading profits, capped at £6,570 overall. The money will again be paid out in a single installment covering June, July and August.
Applications for the second grant will open in August.

Posted in Website Blog | Tagged furloughscheme, seiss, self employed help corona virus

New updates for businesses during Coronavirus

There are 3 major updates this week concerning the support available for businesses during the Coronavirus outbreak.

Please find details below with relevant links.

The Bounce Back Loan Scheme (BBLS)

Open from 4th May 2020

This has been has been set up  to support small businesses who are struggling to get funding through the main Coronavirus Business Interruption Loan Scheme (CBILS).

To qualify -The scheme is open to businesses, including sole traders and partnerships, that were trading on 1 March 2020.

To apply – Complete a two-page application form and self-certify your details. This means lenders do not have to verify the information. Most applicants should receive loans within a few days after being approved.

You can’t apply if you’ve already got a CBILS loan but you can transfer a CBILS loan of up to £50,000 to BBLS before 4 November 2020.

Following the launch of BBLS, the minimum loan for CBILS has been increased to £50,001.

 Bounce Back Loan Scheme features

Up to £50,000 loan: Available loans are from £2,000 up to 25% of a business’ annual turnover or £50,000, whichever is lower. Turnover is based on a full calendar year so if your business was established after 1 January 2019, you should apply the 25% limit to your estimated annual turnover from the date you started.

  • 100% guarantee: Lenders have a 100% government guarantee. The borrower always remains 100% liable for the debt.
  • Interest free for 12 months: The government will cover the first 12 months of interest.
  • Interest rate:The interest rate after the 12 months interest free period is set at 2.5% per year.
  • No repayments for 12 months: Borrowers will not have to begin principal repayments for the first 12 months.
  • No guarantee fee: Businesses and lenders do not have to pay a fee to access the scheme.
  • Finance terms: The length of the loan is for six years but early repayment is permitted without early repayment fees.
  • No personal guarantees: No personal guarantees are required and no recovery action can be taken over a principal private residence or principal private vehicle.

Bounce Back Loan Scheme eligibility criteria

  • Businesses from all sectors can apply. The exceptions are Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive), public sector bodies, insurance companies and state-funded primary or secondary schools – all of these sectors are not eligible to apply.

The business must self-certify the following:

  • Confirm it is UK-based in its business activity and established by 1 March 2020
  • Confirm it has been adversely impacted by coronavirus
  • Confirm it is not currently using a government-backed coronavirus loan scheme (unless using BBLS to refinance a whole facility)
  • Confirm it was not a ‘business in difficulty’ at 31 December 2019 (if it was, then the borrower must confirm it complies with additional state aid restrictions under de minimis state aid rules)
  • Confirm it is not in bankruptcy, liquidation or undergoing debt restructuring
  • Confirm that 50% of the income of the business is derived from its trading activity (this confirmation is not required if the borrower is a charity or a further education college)

 How to apply for a Bounce Back Loan

Accredited lenders are listed on the British Business Bank website.

If you experience problems accessing the British Business Bank website the current list of accredited lenders is as follows:

  • Barclays
  • Clydesdale Yorkshire Bank
  • Danske Bank
  • NatWest
  • Santander
  • RBS
  • Ulster Bank
  • Lloyds Bank
  • HSBC
  • Bank of Scotland

Most lenders are currently only accepting applications from existing customers, but it has been reported that HSBC is taking applications from non-customers if you set up a ‘feeder account’.

Lenders do not need to carry out any credit checks or verify the long term viability of firms.

More information here https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/

 

Top-up to local business grant funds scheme

 New funding is being made available to co-working space tenants, market traders and other businesses in England who aren’t being given funding through the coronavirus business rates relief grant scheme. 

The fund is aimed at small businesses with ongoing fixed property-related costs. Local authorities have been asked to prioritise businesses in shared spaces, regular market traders and small charity properties that would meet the criteria for Small Business Rates Relief. It also covers bed and breakfasts that pay council tax rather than business rates.

Local authorities may choose to make payments to other businesses “based on local economic need”.

To qualify

– Businesses must have under 50 employees and be able to demonstrate that they have seen a significant drop of income due to coronavirus restriction measures.

Grants of £10,000 and £25,000 will be available and local authorities can choose to make payments of any other amount under £10,000.

More guidance and amounts being provided to each council will be released shortly.

For more details visit this link

https://www.gov.uk/government/news/top-up-to-local-business-grant-funds-scheme

 

Self Employed Income Support Scheme – portal opens today!

Self-employed are now invited to get ready to make their claims for coronavirus (COVID-19) support. For more details on the scheme visit our blog by clicking here. 

From today (Monday 4 May), HM Revenue and Customs (HMRC) those who are eligible for the Self Employed Income Support Scheme (SEISS) will be able to claim a taxable grant worth 80% of their average trading profits up to a maximum of £7,500 (equivalent to three months’ profits), paid in a single installment.

HMRC has opened the portal so you can go online and check your eligibility for SEISS.

In order to receive quick confirmation from the eligibility checker, make sure you have –
Your Unique Taxpayer Reference (UTR) and National Insurance Number to hand and make sure your details are up-to-date in their Government Gateway account.

Once the online check is complete, eligible customers will be given a date when they can submit their claim.
For more details here and the link to the portal click here. 

 

For other help available during the Coronavirus outbreak check out our blog – click here. 

 

If you are business in need of help and support and would like to talk to us about our accounting services please call or email us.

Posted in Website Blog | Tagged business coronavirus, business loans, business update, businessgrants, seiss

Business Survival Tips

 

Business Survival Tips

Over the last few weeks much of the measures you will have been putting in place will be emergency plans. Now is the time to review your business plan for the next 3 months. You need to come up with a new strategy and probably revise your business plan for the next 6 months at least.

We would also recommend you consider the following.

Check your costs

Do a detailed audit of ALL your outgoings. We often have subscriptions or small costs for memberships coming out of our business bank account which normally we hardly notice. But this is the time to do a detailed audit of every expense and analyse if it can be suspended or cancelled. You will then have a clear picture of your financial liabilities.

Check your contracts

You will have contracts in place with staff and customers. If you have not checked this recently now is the time to do this. If you think you may have to may have to make staff redundant at the end of this, then you need to take advice now. Not all businesses will bounce back, and many may recede before they grow back to pre-corona status. So therefore, you need to know where you stand and your liabilities. Speak to an HR expert. You may need to consider various options to keep your business running and it might be feasible to avoid redundancy with staff pay cuts or reducing hours.

Chase money owed to you

This should be a matter of urgency. Many businesses will not survive so you need to deal with any outstanding debts quickly and try and recover money owed. Managing relationships sensitively with customers is of course important. Seek advice if you are not sure the best methods of collecting unpaid invoices.

Map out the risks

Understand the worse case scenarios. Plan for a later lock down than you think, consider how long it may take for your business to recover. Talk to customers if possible and find out how they are feeling and what their plans are. If you are a business aimed at consumers this might be more difficult. Each business will have its own unique set of circumstances so its important to consider your position and what the main issues and threats to you are.

Can you pivot your business model?

Is there any opportunity for you to trade in another way? Make sure you have explored all the options open to you. Can you trade online, run courses online, sell goods or services?

Do not stop marketing

Even if you are just keeping social media channels going and sending emails to customers – do you best to keep in touch. Communicating with your audience is important.

You can run some competitions on social media and offer prizes people can use when you start trading again. Do some videos and keep customers entertained? How about raising money for a charity?

 Work on your business

Make use the time to update your website, refresh your social media or plan some new ideas for goods and services for when this is over.

 

Now it may seem like this will go on forever. It wont and its important to try and stay as positive as possible. Ensure you have accessed all the financial help that is available to you. The most important message is to plan and prepare as those businesses with a strategy will emerge stronger.

 

Posted in Website Blog | Tagged business, business coronavirus, business problems, business survival, cash flow

Is it time to switch your company cars to electric?

Research by the UN Development Programme has found that two-thirds of us believe Climate Change is a global emergency. To address this, the Committee for Climate Change has set the target of Net-Zero emissions for the UK by 2050.

To meet this aim, the organisation has outlined a need to reduce emissions by 80% by 2035. All car and van manufacturers are to sell zero-emission vehicles only by 2030 and a small proportion of hybrids until 2035.

Low Emission Zones

Transport for London introduced its Ultra Low Emission Zone (ULEZ) in April 2019. This charges a daily rate for entering the zone for any vehicle that does not meet the latest emission standards. Other Clean Air Zones (CAZ) have been introduced in Bath and will be introduced in Birmingham, Leeds and Oxford later this year. Over 50 authorities are now reviewing schemes across their towns and cities.

Electric vehicles are a key contributor in achieving net-zero. The UK’s new car market fell by around a third in the UK last year, yet sales for electric cars and hybrids rose sharply, equating to 10% of UK car sales.

Concerns about Electric Cars

There have been concerns for drivers considering a move to electric vehicles. Until recently, the battery range has barely reached more than 100 miles. Charging points have not been widely available across the country. And costs have been high. Battery range has now increased to an average of 250 miles, and charging points are becoming more increasingly accessible.

To incentivise company car drivers to go electric, the Government offers extremely attractive benefit-in-kind (BIK) tax rates.

What are the tax benefits of electric vehicles?

Company cars are taxed based on a percentage of their total P11d value. This percentage is based on the car’s published CO2 emissions to calculate how much tax you pay. This is also affected by whether you are a 20% or 40% taxpayer.

  • For the tax year 2021 – 22, the BIK tax rate has increased to 1% and will rise again to 2% in 2022. The same rate will apply for any hybrid vehicle with net emissions of less than 50g/km2 and a battery range of at least 130 miles.
  • Plug-in hybrid vehicles (PHEV) are being incentivised. These cars have a battery charged externally with a current range of between 20-30 miles and a petrol or diesel engine. PHEVs will be taxed at 13% in the BIK scheme for 2021/22, rising to 14% for 2022/23. Compared to a typical diesel company car with emissions between 110-114g/km2, taxed at 32%, the savings are considerable.

Electric vehicle running costs

Running costs are much lower than the traditional combustion engine cars. Electric vehicles cost between 2-3p per mile, a typical diesel company car 9-12p per mile, three to four times more. Servicing is much cheaper. With far fewer moving parts, servicing and repair is less than half of what you will spend on petrol or diesel.

Additional benefits for leasing an Electric Car

If you lease your cars, there are additional benefits. Whilst the purchase price of an electric vehicle is generally higher than standard vehicles, residual values (the projected value of the vehicle at the end of its contract) are increasing all the time. This makes leasing deals competitive against standard cars, made even more attractive because you can offset 100% of your lease against taxable profits for an electric vehicle or qualifying hybrid.

No congestion charge!

Electric vehicles are not subject to the congestion charge in London, ULEZ, or CAZ charges as described above.

What are electric vehicle models available?

  • The number of models in the electric market has been low, with Nissan, Renault, BMW and Tesla the only manufacturers who have really embraced the sector. Volkswagen is leading the way, launching the ID.3 model in 2019 and now the ID.4 later this year. The ID.3 sold more than 212,000 electric cars in 2020.
  • There is an ever-increasing number of desirable electric vehicles available with ranges of 250 miles or more. Look at the Tesla Model 3, Jaguar I-Pace, Audi e-Tron, Mercedes EQC, BMW i3, Nissan Leaf, Renault Zoe or the Kia e-Niro, to name a few.

What do I need to consider when buying an electric vehicle?

The Office of Low Emission Vehicles (OLEV) offers a £3500 grant to reduce electric vehicles’ cost. This narrows the gap compared to standard cars. For example, the current VW e-Golf costs including a grant of £27,575, whilst a 1.5TSi GT equivalent costs £26,635.

Running out of battery charge used to be the biggest worry with electric vehicles. But ranges are extending as battery technology improves. Now, the bigger concern is where to charge. If you can do so, it is worth installing chargers at your workplace. The OLEV Workplace Charging Scheme can subsidise the costs – see more.

You can also help employees install home charging points. Many businesses are offering interest-free loans to their staff, whilst others pay the cost, again enjoying a grant of up to £500 for installation.

There is still concern about the number of charging points available when out and about. There has been rapid growth, with over 40,000 connectors and 23,000 devices available across the country. Coverage is strong in London, Scotland and the South West and is increasing elsewhere.

It is essential to know that batteries are warrantied for eight years and 100,000 miles, so unless you drive huge distances or intend to keep your cars for longer than that, you have little to worry about.

By going electric, your company can shout loud your green credentials. Do not underestimate how important this will be in years to come.

Need more help?

We are here to help you. So, if you think now is the time to consider an electric company car, let us do the maths to ensure it adds up financially. Of course, you may think saving the planet is worth a few more pounds anyway!

 

 

Posted in Website Blog | Tagged electric car, electric car tax, electric cars, tax and electric cars

Be tax return ready!

With the current climate its never been more important to get your 2019/20 tax return completed and filed.

Many self-employed business owners now find they have more time on their hands so use this time to get your tax return done. If there are any announcements on additional benefits dependant on your earnings during 2019/20 you may need this to be ready to apply.

So what do you need to do?

If you have never filed a return before then, of course, this may seem daunting. You must have registered to file a self-assessment tax return with HMRC and you will need your UTR and Government Gateway login. This comes in the post so make sure you apply if you haven’t done this already.

If you do this annually and are used to it then don’t leave it to the last minute this year and get this done as soon as possible. If you are due a refund, then the sooner you complete your return, the sooner you get the refund!

Get your paperwork straight!

Are your receipts in a box or carrier bag waiting to be sorted!

Gather all the information you need to submit your return. This will be much easier for you if you have been using an online accounting system such as Xero. All the information will be there and all you need to do is ensure it is up to date.

If you have been using excel spreadsheets you will need to ensure you have entered all your income and expenditure.

Make sure you have paid close attention to your record keeping. Check your bank records against your income and expenses and that you have all relevant receipts. Reconcile your bank statement to ensure your figures are correct.

Frequently asked questions

I haven’t made a profit do I still need to do a tax return?

HMRC says that you need to send a tax return and pay your tax bill through Self Assessment if, in the last tax year, you were:

· a self-employed sole trader earning more than £1,000

HMRC have a useful tool which you can use to check if you need to a tax return – click here 

Is there any other income or expenses I must include? 

Here is a list of additional incomes you may have, and you must include 

  • Property rental income – find out more info here
  • Any savings interest or dividends
  • Payments from tips/commission
  • Income from overseas 
  • Pension contributions
  • Benefits including State Pension, Child Benefit and Blind Person’s Allowance

What are the allowable expenses for small businesses?

There are several costs that you incur when running your business that you can claim back against your Self-Assessment tax bill.

Here is a list of the main items small businesses can claim:

  • Office rent & utilities including business rates 
  • Insurance 
  • Marketing costs including advertising, networking, website and IT 
  • Stationery
  • Phone Bills
  • Uniforms
  • Staff salaries or freelancer/subcontractors
  • Anything you need to buy to sell on -e.g. stock or raw materials
  • Bank charges 
  • If you are working from home, you can claim a percentage of business premises costs. This would include utilities, council tax, mortgage interest or rent, telephone and internet. You must find a ‘reasonable method’ of dividing the costs between personal and business use. They suggest using the number of rooms used for business purposes, or the time spent working from home.

Read our blog on tax deductibles here.

Every person/business has a unique set of circumstances and having an accountant who understands the tax system will benefit you by removing any worry or concerns you have. Filing a tax return incorrectly could result in a fine or a repayment later. You want to ensure you are paying the right amount of tax. 

If you decide to file this without speaking to an accountant just check, check and check again!!

We are of course happy to help you and advise you! Just call us.

Self Employed Income Support Scheme

The new ‘Self employed Income Support Scheme’ has been launched.

Today the Rishi Sunak, Chancellor of the Exchequer, has announced support for the self-employed. This covers 95% of people who receive the majority of their income from self-employment.

How much will I be entitled to?

A cash grant worth 80% of your average monthly trading profit over the last three years will payable around June.

The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

To qualify, more than half of your income in these periods must come from self-employment and you must have filed a tax return for 2018-19. 

If you haven’t yet filed this, you have four weeks to do so to qualify for the scheme.

How do I apply?

Self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account. Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply, you do not need to do anything right now.

Which period will this cover?

The income support scheme will initially cover the three months to May. 

Grants will be paid in a single lump-sum installment covering all 3 months and will start to be paid at the beginning of June.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. 

I pay myself a salary through my limited company – am I eligible?

If you pay yourself a salary and dividends through your own company, then you are not covered by the Self Employed Income Support Scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if you are operating a PAYE scheme.

Does this scheme apply to partnerships?

Yes, this scheme also applies to members of partnerships.

My profit was in excess of £50,000 per year do I qualify?

No

I did not make a profit over the past 3 years so do I qualify?

We are awaiting further advice on this. We will update this page once we know.

Can I access any other help?

Before grant payments are made, the self-employed will still be able to access other available government support for those affected by coronavirus including more generous universal credit and business continuity loans where they have a business bank account. 

The loan is interest-free. You can also defer tax payments including VAT and the July self-assessment tax payment.

Please read our blog here on the other available help 

Does this scheme only apply if I am earning nothing currently?

No, if you are still able to trade then you can do so and still apply for help under this scheme.

 

We will continue to update you on any further developments.

Posted in Website Blog | Tagged Coronavirus, self employed help corona virus, Self Employed Income Support Scheme