Tax update – Autumn Statement 2015

Posted on By dc_admin

Summary

The Chancellor, George Osborne, delivered his Spending review and Autumn Statement Speech on 25 November 2015. This article outlines the changes relevant to small-business owners.  The few ‘headlines’ were

  • an extra 3% stamp duty land tax charge on the purchase of additional residential properties from 1 April 2016
  • a requirement to make a payment on account in respect of capital gains tax within 30 days of the disposal of residential properties from April 2019
  • the changes announced to tax credits in Summer Budget 2015 have been abandoned.

More information on the tax proposals scheduled for inclusion in Finance Bill 2016 will be published in the Government’s ‘Overview of Legislation in Draft’ on 9 December.

Making tax digital

As announced at Summer Budget 2015, the government wants to digitise the tax process. The aim is to modernise the tax system and provide a more real-time working basis of individual and business tax affairs, which one would expect, will lead to the advance of tax payments in many cases in due course. Key details so far are:

  • digital tax accounts are to be introduced for all small businesses and individuals by 2016/17
  • by 2020 most businesses, landlords and the self-employed will be required to update HMRC quarterly regarding their tax affairs. The details of how this will work in practice have not yet been decided
  • the intention to consult on ways to simplify tax payments with suggestions of tax payable as profits arise (as announced for capital gains tax arising on the disposal of residential property with payment due 30 days after completion from April 2019).

Employees and pensioners will not be required to update their digital tax accounts quarterly unless they have secondary incomes of more than £10,000 per year.

Simple assessment

The Government is to simplify the tax payment process for taxpayers within the Self-Assessment system where HMRC already holds all the data it needs to calculate the tax liability. Rather than requiring the taxpayer to file a return, instead HMRC will send a legally enforceable payment demand, which the taxpayer can challenge or appeal. This is expected to be introduced from 2016/17.

Residential property

An additional 3% on top of current SDLT rates from 1 April 2016 will be charged on the purchase of additional residential property (e.g. buy to lets and second properties over £40,000), though exclusions to certain corporates and funds are expected.

Dividends for company owners

There was no further commentary with respect to the Summer Budget 2015 announcement regarding the increase in dividend tax rates and the dividend allowance due to apply from April 2016, so the expectation is that these will be introduced in the Finance Bill 2016 as previously announced

Pensions

Further to the announcement at Summer Budget 2015, the Government has now consulted on fundamental changes to pension tax relief. One of the options is that instead of receiving tax relief on the contribution, the savings would work more like an ISA, with a Government top-up and tax-free extraction on retirement.

The Government will provide an update on this at Budget 2016.

Self-Assessment time limits

Draft legislation is to be published ahead of Finance Bill 2016 to clarify that the time allowed for making a self-assessment is four years from the end of the tax year. No further information is included in Autumn Statement documentation but it is possible that this has been prompted by a recent case on tax administration.

Conclusion

There wasn’t a great deal in the Autumn Statement that we didn’t know about, or expect. This article is not a comprehensive review, but concentrated on the issues relevant to small-business owners. If you’d like to know more you can read the government’s documents here.  If you’re concerned that any of the changes mentioned may affect you please get in touch.

Leadership in Micro-businesses

Posted on By dc_admin

Why, if your business has no or fewer than 10 employees, would leadership be the most important business skill you can have?

The Statistics Bit

A micro-business is defined, by the European Commission, as one with fewer than 10 employees, and a turnover (annual sales figure), or balance sheet value of less than 2 million euros. Micro- businesses are hugely important. In 2014 there were 5 million micro-businesses in the UK, employing 33% of the workforce, and generating 19% of turnover (annual sales figure).*

Sole-proprietorships and self-employment has increased over the last few years, with fewer businesses employing staff.*

So as the owner of a micro-business you are making an important contribution to the national economy. What can you do to keep it going, improve your prospects and grow?

The answer is that you need to lead your business forward. There are several steps you can take.

Have a clear vision

All businesses exist for a purpose. Most share a common goal to make money, but each individual business has its own reason for operating.

A business owner/manager needs to have a clear vision of their company’s place in the market, its products or services and its target customers. This vision can evolve and change, but many organisations start with one or just a few products or services and build from there. A narrow focus allows the development of expertise, which can be an asset to building a reputation and a niche.

The standard structure of a small business is one person, perhaps with employees or subcontractors fulfilling operating activities.

Can you describe what your business does in one or two sentences? Is it interesting and does it engage you? Examples of company’s visions (sometimes called mission statements ) are:

‘to make natural, delicious, healthy drinks that make people live well and die old’ Innocent Ltd

‘we’re a leading UK charity enabling people to travel by foot, bike or public transport for more of the journeys we make every day’  Sustrans

‘to bring inspiration and innovation to every athlete in the world’ Nike

You can see that each one is concise, specific in nature, but vague enough to allow for room to grow, and introduce complementary products/services.  The vision is a starting point for what you are or will be striving to achieve.

Effective planning

It’s time to flesh out your ideas, be more specific about your goal(s), and come up with a method to make it happen. Planning occurs in a cycle:

  1. Identify your requirements & define the scope of your activity
  2. Document your plan – note your assumptions, costs, timescales, resources, potential pitfalls. It doesn’t have to be a text book, nobody else needs to see it, so use your own method.
  3. Implement – put your plan into action, keep checking you’re on target, tweak, nudge, adjust whatever you need to do.
  4. Monitor your progress – is your business operating efficiently? Are you spending less than is coming in? Are you getting closer to achieving your objectives? Do your activities focus on your objective, or do you get side-tracked?
  5. Review – what is going well, what needs improvement, do you need to sell more, or cut costs?

Planning is not a one-off activity. When you reach the review stage, start again with a fresh look at your objectives and go back to stage 1. You’ll find that you make different decisions, with the knowledge that you’ve gained and documented.

Communication

Effective communication is the cornerstone of a successful venture. You may be a sole trader, but you don’t operate entirely without other people. Open and engaging relationships with suppliers, customers and employees will encourage loyalty and increase your chance of referrals. Always aim to be clear, consistent and approachable.

If you employee people, give each one a clear job description. Be clear about their remuneration, your expectations, and consider their aspirations too. Set objectives, and if feasible, get them involved in the planning process. People who ‘own’ their jobs derive more job satisfaction, and are more likely to remain loyal and valuable workers.

Motivation and ideas

We often assume that ‘motivation’ is something to bestow on others. Managers need to motivate their employees, dog trainers motivate their dogs, and coaches motivate athletes. If you have your own business, what motivates you?

Nobody else will do it for you. Find ways to keep your interest in your business. Do you have new ideas? Did you have ideas that you’ve not tried out? What are your competitors doing? Can you do it better, or differently?

*source: House of Commons Library, Briefing paper No. 06152

Further reading:

Businessballs – a huge online business manager’s resource library

 

 

Summer Budget 2015 – Small business essentials

Posted on By dc_admin

The Summer Budget 2015 will have an impact on all UK businesses, and many individuals.  Changes are being introduced from April 2016.  What follows is a summary, with extracts, from the Summer Budget 2015 Policy Paper, published 8th July 2015.

Income Tax and Individual Taxpayers

The personal allowance will increase to £11,000 in 2016-17 (it is currently £10,600). The higher rate threshold will increase from £42,385 to £43,000.

The effective inheritance tax threshold will be £1 million, where a main residence is passed to descendants. This will be paid for by the introduction of a taper to the annual allowance for pensions tax relief for people whose total income is above £150,000 per annum.

Insurance premium tax will increase from 6% to 9.5%

Businesses

Corporation tax will be cut from the current 20% to 19% in 2017, and 18% in 2020.

The Annual Investment Allowance will be £200,000 from January 2016. This allowance means businesses can claim capital allowances on tangible fixed assets of up to £200,000 in the year of purchase, rather than spreading the tax relief over several years.

From April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance (the £2,000 reduction in employer’s national insurance contributions).

In the March Budget 2015, the government announced it would transform tax administration for individuals and small businesses over this Parliament, leading to the end of the tax return. Small businesses will be able to manage their tax through a digital account linked to business software. HMRC will begin discussions with businesses and software providers about how best to integrate tax reporting and payment with everyday business activity, to inform a roadmap the government will publish by the end of 2015 setting out the policy and administrative changes needed.

Sunday trading – The government will consult on devolving powers on Sunday trading to city mayors and Local Authorities. This will look at allowing mayors or councils to extend Sunday trading for additional hours within parameters that they would determine.

Enterprise Zones – The government will hold a bidding round for a new programme of Enterprise Zones for this Parliament.

Tax lock – The government will legislate to set a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee (Class 1) NICs rates, ensuring that they cannot rise above their current (2015-16) levels. The tax lock will also ensure that the NICs Upper Earnings Limit cannot rise above the income tax higher rate threshold; and will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this Parliament. (Summer Finance Bill 2015)

Business tax roadmap – The government will publish a Business tax roadmap by April 2016, setting out its plans for business taxes over the rest of the Parliament.

Self-employed National Insurance contributions – The government will consult in autumn 2015 on abolishing Class 2 National Insurance contributions (NICs) and reforming Class 4 NICs for the self-employed

Simplified expenses: legislative amendments – The government will amend the simplified expenses regime introduced in Finance Act 2013 to ensure that partnerships can fully access the provisions in respect of the use of a home and where business premises are also a home. (Finance Bill 2016)

Business skills, infrastructure and regional development

To support innovation throughout the country, the government will invest £23m in 6 Next Generation Digital Economy Centres over 6 sites (London, Swansea, Newcastle, Nottingham, York and Bath), leveraging £22 million of additional funding, and partnering with LEPs, regional councils, and local SMEs. These centres will exploit opportunities across sectors of the digital economy including the creative industries, finance, healthcare and education.

The so-called Northern Powerhouse seems to fail to recognise that the UK doesn’t end at Leeds. Although there is mention of upgrading the final stretch of the M1/A1 route between Newcastle and London to motorway. The government will look into the case for renaming the A1(M) north of Leeds as the M1. The A1 will be dualled north of Newcastle as far as Ellingham,

Employers

The Employment Allowance will rise from £2,000 per year to £3,000 from April 2016. This reduces the cost of Employer’s National Insurance contributions. Most small businesses will be eligible, but as mentioned above, the allowance will no longer be available to companies where the sole director is the only employee.

A National Living Wage is being introduced for workers aged 25 and over. National Living Wage – The government will introduce a new premium for those aged 25 and over starting at 50 pence leading to a new National Living Wage (NLW) of £7.20 in April 2016. The target is £9.00 per hour by 2020.

National Minimum Wage – The combined 50 pence premium with the 20 pence minimum wage increase on the current rate will benefit 1.7 million workers and means that a current NMW worker working 35 hours a week will see their annual salary increase by over £1,200 from April 2016.

Taxation of employee benefits and expenses – As announced at Autumn Statement 2014, from April 2016 the government will simplify the tax system by introducing a statutory exemption for trivial benefits in kind costing less than £50. (Finance Bill 2016)

Apprenticeships levy – The government will introduce a levy on large UK employers to increase the number of apprenticeship starts. In England, employers will be able to access this funding for apprenticeship training. Details including rates and implementation will be set out in the Spending Review.

Dividends

Dividend tax credits will be replaced with a tax-free Dividend Tax Allowance of £5,000, and new dividend tax rates. The tax rates will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers, and 38.1% for additional rate taxpayers.

Landlords

Tax relief on mortgage interest for individual landlords will be restricted to the basic rate of income tax.

Individuals renting out a room in their main residence will benefit from an increase in Rent-a-room tax relief to £7,500 from April 2016 (currently £4,250).

Reform of the Wear and Tear Allowance – From April 2016, the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets. The government will publish a technical consultation before the summer. (Finance Bill 2016)

Further information

The full Summer Budget can be found here https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015

If you are concerned about how any of these changes could affect you please contact us.

 

Employment Law Changes

Posted on By dc_admin

Employment law changes come into effect twice a year, in April and October.  This year, from the beginning of the new tax year on 6th April 2015 there are several changes for employers to be aware of.

Key Employment Law Changes April 2015

Parental Leave

Parents of children born or adopted after 5th April 2015 will have more flexibility as to which partner takes time off work to care for the child or children, by opting for shared parental leave.

Parental leave is to be extended to parents of any child under 18 years old.  Adoption pay is being brought into line with maternity pay, and the 26 week qualifying period will no longer apply.

Statutory Pay

Statutory parental leave increases to £139.58 per week. Statutory sick pay increases to £88.45 per week.

The limit for a week’s pay when calculating redundancy pay will rise to £475.

Managing sickness absence

A health and work assessment and advisory service is to be introduced, offering free occupational health assistance for employees, employers and GPs. The service can provide an occupational health assessment after four weeks of sickness absence.  The service is being rolled out during 2015, in England and Wales. More information is here: https://www.gov.uk/government/collections/fit-for-work-guidance

If any of the above concerns you or your staff, you can get more information from ACAS free of charge, or from your human resources department if you have one.

Budget Spring 2015

Posted on By dc_admin

Budget Spring 2015

We’re all aware that this budget comes very soon before the general election on 7th May 2015. The proposals in this budget may not become law, and anything could be amended. Many of the announcements related to changes we already know about, but there were one or two surprises.

Personal Taxation

Basic Personal Allowance and Transferable Allowance for 2015/16

The personal allowance for those born after 5 April 1938 will be £10,600 for 2015/16. As a corollary, the transferable allowance for married couples and civil partners (10% of the personal allowance) will be £1,060. This is available to certain couples, subject to qualifying criteria.

The higher rate threshold (i.e. the aggregate of the personal allowance and the basic rate limit) will be £42,385.

Personal Savings Allowance

It is proposed that a new Personal Savings Allowance be introduced from 6 April 2016. For a basic rate taxpayer, this will exempt from income tax the first £1,000 of savings income, such as bank and building society interest. For a higher rate taxpayer, only the first £500 will be exempted.

The Personal Savings Allowance will not be available to additional rate taxpayers. At the same time, the deduction of basic rate tax at source from interest paid by banks and building societies will be abolished for all savers.

Online Tax Accounts

Over the last decade or so, we’ve seen a steady decrease in the numbers of paper forms being submitted to all governmental departments, and an increase in online services. The government seems keen to extend the transition by planning to abolish the paper tax return for millions of individuals and small business through the introduction of digital tax accounts. A roadmap setting out the policy and administrative changes will be published later this year.

In addition, the Government will consult on a new payment process to support the use of digital tax accounts that allow tax and National Insurance contributions to be collected outside of PAYE and self-assessment. This will be legislated for in the next Parliament.

How (or if) this will work in practice we have yet to find out.  The principles of NI and taxation are not changing, but the new methods of reporting and paying could be significant changes for self-employed people.

Direct Recovery of Debts due to HMRC from Taxpayers’ Bank Accounts

Again, this is not a new announcement, and the government intends to legislate for it in a firure finance bill. It is something to be aware of if your tax affairs are not up-to-date.  HMRC will be able to collect payment of tax and duties directly from credit balances in debtors’ bank and building society accounts, including ISAs, without first having to apply to the courts. HMRC will only take action against debtors who owe over £1,000 of tax or tax credits. They will always leave a minimum aggregate of £5,000 across debtors’ accounts, and will only put a hold on funds up to the value of the debt. Secondary legislation to be published shortly will set out details of the process and safeguards for taxpayers.

This is intended to be used when taxpayers fail to pay on time, and by the time things reach this stage, any taxpayer should be fully aware of all attempts made by HMRC to recover the debt.

Employment Taxation

Abolition of the £8,500 Threshold for Benefits in Kind

The £8,500 earnings threshold that determines whether employees pay income tax on all of their benefits in kind and expenses, and whether employers pay Class 1A National Insurance contributions (NICs), is to be abolished for 2016/17 onwards.

Currently, an employee whose earnings for the tax year are less than £8,500  pays tax only on certain employee benefits. The abolition of the threshold will mean all employees will be taxed on their benefits and expenses in the same way. The employer’s NICs treatment will follow the income tax treatment.

Statutory Exemption for Trivial Benefits in Kind

A statutory exemption is to be introduced for 2015/16 onwards that will allow employers to identify and treat certain low value benefits provided to employees or former employees as trivial. These benefits will then be exempt from income tax and Class 1A National Insurance contributions and will not need to be reported to HMRC. A benefit will be trivial if it meets all the following conditions:

  • the benefit is not cash or a cash voucher;
  • the cost of providing it does not exceed £50;
  • the benefit is not provided under salary sacrifice arrangements or any other contractual obligation; and
  • it is not provided in recognition of particular services performed, or to be performed, by the employee.

An annual cap of £300 will be introduced for office holders of close companies (broadly those controlled by 5 or fewer people) and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of exempt trivial benefits each year.

Employee Expenses: Dispensations

The current system whereby an employer can apply to HMRC for a dispensation to pay expenses free of tax in certain circumstances will be scrapped for 2016/17 onwards. Instead, expenses provided to employees will automatically be exempt in any case where the employee would have been eligible for a deduction had he incurred and paid the equivalent expense himself. The exemption will also allow the employee to be paid a scale rate rather than be reimbursed the actual expense he has incurred. This can either be a rate set by HMRC or a rate that the employer has agreed with HMRC. The exemption will also apply to benefits in kind provided by employers in respect of expenses incurred by their employees It will not apply to expenses/benefits provided as part of a salary sacrifice arrangement or in conjunction with other arrangements that seek to replace salary with expenses. Similar rules will apply for NIC purposes.

Collection of Tax on Benefits and Expenses through Voluntary Payrolling

Legislation is to be introduced to allow HMRC to make changes to the PAYE Regulations to provide for voluntary payrolling of certain benefits in kind. The intention is that employers will be able to opt to payroll benefits for cars, car fuel, medical insurance and gym membership for 2016/17 onwards. Where employers do so, they will not have to make a return on Form P11D for these benefits. Instead, they will report the value of the benefits through Real Time Information, and that value will count as PAYE income liable to deduction using the PAYE Tax Tables. The amended Regulations will determine the value to be placed on the benefit for this purpose.

Van Benefit Charge for Zero Emission Vans

The van benefit charge for zero emission vans will increase from £nil, beginning in 2015/16. The van benefit charge for such vans will be 20% of the van benefit charge for vans which emit CO2 in 2015/16, 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 and 90% in 2019/20. From 2020/21, the van benefit charge for zero emission vans will be the same as the van benefit charge for vans which emit CO2.

National Insurance Contributions

NICs for the Self-Employed

Class 2 contributions will be abolished in the next Parliament. Class 4 contributions will be reformed to introduce a new contributory benefit test. The Government intends to consult on the proposals later in 2015.

Business Taxation

Research and Development

Legislation will be introduced to restrict qualifying expenditure for research and development (R&D) tax credits so that the cost of consumable items incorporated in products that are sold in the normal course of a company’s business are not eligible for R&D relief, with effect from 1 April 2015. Qualifying expenditure on consumable items will be limited to the cost of only those items fully used up or expended by the R&D activity itself which do not go on to be sold as part of a commercial product. This restriction will not apply where the product of the R&D is transferred as waste, or where it is transferred but no consideration is given.

In addition, from 1 April 2015, the rate of the above the line credit for large companies will increase from 10% to 11% and the rate of the relief for the SME scheme will increase from 225% to 230%.

 VAT

VAT Registration Thresholds

With effect from 1 April 2015, the VAT registration threshold will be increased from £81,000 to £82,000. The deregistration threshold will be increased from £79,000 to £80,000. The registration and deregistration thresholds for acquisitions from other EU member states will be increased from £81,000 to £82,000.

This is a summary of announcements most likely to affect owners of small UK businesses.  Things could change after the general election but in the meantime if you’d like more information on how the changes may affect you please get in touch.

The new tax year 2015-16

Posted on By dc_admin

The new tax year 2015-16 is almost with us. There are a few changes for individuals and employers to be aware of.

Income tax

From 6th April 2015 the personal tax allowance will increase to £10,600 for the 2015/16 tax year. Taxpayers will pay 20% on the next £31,785 of their income, so higher rates of tax will be applied to income above £42,385.

A new married couples’ allowance is being introduced from April 2015. This means that if eligible you could transfer up to £1,060 of your allowance to your spouse or civil partner. Your partner would then save up to £212 tax during the tax year. To qualify, one spouse must have a total income no higher than £10,600, and the other must be earning between £10,601 and £42,385. One person per couple can register here https://www.gov.uk/marriage-allowance

Employer’s National Insurance

There is some good news for certain employers for the 2015/16 tax year. The NIC allowance is continuing, so employers will not need to pay the first £2,000 of the 13.8% employer’s national insurance liability. It’s a good idea to check your payroll software is set up to enable this deduction.

Also, from April 2015 employers’ NICs on payments to employees aged under 21, and apprentices under 25 will be nil, on salaries/wages up to £42,385. The normal 13.8% rate will apply to amounts in excess of that threshold.

The NIC deducted from employees is not affected by the above.

Pensions

There have been wide-ranging changes to the way people can pay into pension schemes and withdraw cash. The tax savings or consequences of your decisions could be significant, and you are strongly advised to seek advice from a regulated financial advisor before making any changes, or simply to review your pension status.

Payroll reporting

Penalties for late submissions of PAYE reports (RTI / FPS / EPS reports submitted online on or before the wages/salaries payment date) are due to begin in March 2015.  3 days’ grace will be allowed for employers with fewer than 50 employees.

Penalties start at £100 per late return, further details are here https://www.gov.uk/what-happens-if-you-dont-report-payroll-information-on-time

Auto-enrolment pension schemes

Between now and 2017 employers with small numbers of employees will be contacted by the Pensions Regulator, and will need to have a compliant pension scheme for all eligible workers. Employers should ensure they understand their obligations and act in plenty of time to set up a scheme before their compulsory staging date.  The staging date is the date on which employees must be enrolled and the scheme begins. Information can be found on the Pensions Regulator website, and/or from your financial advisor.  http://www.thepensionsregulator.gov.uk/employers.aspx

If you would like any help with any of the above please contact us.

The VAT Mini One Stop Shop, or VAT MOSS

Posted on By dc_admin

The VAT Mini One Stop Shop, or VAT MOSS is relevant to all businesses selling electronic services to consumers in any of the 28 EU countries.

This summary explains how to register and report digital supplies made in the EU, for small UK businesses (it is adapted from HMRC’s overview).

Digital supplies include, but are not limited to:

  • Download and online games
  • E-books (e.g. Amazon Kindle)
  • Download and streaming music and videos
  • Cloud computing, including software provided as a service
  • Mobile phone services
  • Internet telephony (e.g. Skype)
  • Streaming television (e.g. Netflix)
  • Broadcast television and radio

The VAT MOSS scheme is intended to simplify changes to VAT regulations from 1st Janaury 2015, so that businesses only need to register for VAT in their own country.  If you do not use the VAT MOSS Scheme you must register for VAT in your customer’s country and comply with their VAT regulations.  There is no minimum value or reporting threshold, so any sale no matter how small must be reported.

If you are below the UK VAT registration threshold (currently £81,000) you can register for UK VAT to use the UK VAT MOSS. You can charge and account for VAT in respect of your EU cross-border B2C supplies but won’t have to charge and account for VAT on your UK domestic supplies. In addition, you will also be able to reclaim any VAT charged on business expenses directly related to your cross-border digital service supplies

Summary

If your business supplies digital services to consumers in the EU, you can register for HM Revenue and Customs (HMRC) VAT Mini One Stop Shop (VAT MOSS) scheme.

The Union VAT MOSS scheme is for businesses established in the EU including the UK.

Once you have registered for a UK VAT MOSS scheme, you submit, each calendar quarter, a single MOSS VAT Return and single VAT payment to HMRC.  HMRC will then forward the relevant parts of your return and payment to the tax authorities in the member state(s) where your consumers are located. This fulfils your VAT obligations. By using the VAT MOSS scheme, you won’t have to register for VAT in every EU member state where you make digital service supplies to consumers.

You also need to submit your usual VAT return.  If you do not meet the UK’s criteria for VAT registration, you can register voluntarily, submit your VAT MOSS returns once a quarter, and submit ‘nil’ domestic VAT returns.

Registration

To use the Union VAT MOSS scheme you need to be registered for UK VAT.

Once you have a VAT registration number, you use the same set of Government Gateway credentials to register for the Union VAT MOSS scheme using HMRC’s online services. You can use the VAT MOSS system to account for VAT on all your cross-border digital service supplies in member states where you don’t have an establishment.

If you do not want to have to register for VAT in other EU member states, you must register for VAT MOSS by the 10th day of the month following your first digital services supply. So, for example, if you make supplies on 8 July 2015 and want to use the VAT MOSS scheme to declare sales in the tax periods ending 30 September 2015, you must register by 10 August 2015. Your scheme registration will then be back-dated to the date of the first cross-border digital services sale on 8 July.

VAT MOSS de-registration

The VAT MOSS scheme is optional. If you decide to de-register from the scheme, tell HMRC using the online service, at least 15 days before the end of the calendar quarter in which you intend to stop using the scheme. For example, if you want to de-register from 1 July, you must tell HMRC before 15 June.

Once you’ve de-registered from the scheme you won’t be allowed to rejoin that scheme in any member state for 2 calendar quarters (normally starting after the first day of the next calendar quarter).  You may need to register for VAT in other EU countries if you are still selling electronic services to consumers.

VAT MOSS returns

The VAT MOSS scheme is used to account for VAT due on all supplies to consumers in member states where you have no establishments. VAT MOSS returns are calendar quarterly only. The deadlines for submitting your VAT MOSS returns are:

  • 20 April for quarter ended 31 March
  • 20 July for quarter ended 30 June
  • 20 October for quarter ended 30 September
  • 20 January for quarter ended 31 December

Union VAT MOSS returns

The return should be used to declare the VAT due on supplies of digital services you make to consumers in other member states where you have no establishments. Any VAT due on sales to UK consumers should be declared on your UK VAT Return.

Completing VAT MOSS returns

From 1 April 2015, you’ll be able to complete your return online. You’ll also be able to save partially completed returns on the online system before submitting your fully completed VAT MOSS Return.

  1. Log on to VAT MOSS online service.
  2. From the ‘At a glance’ screen, select ‘View VAT Mini One Stop Shop periods’.
  3. Select ‘Create a new return’.
  4. For the selected tax period, select ‘Submit a nil return’ or ‘Add taxable supplies of digital services from the UK (MSI)’ or where appropriate you can select ‘Add taxable supplies of digital services from the fixed establishments in other member states.’
  5. Select a country from the drop down menu, enter the total value of supplies (excluding VAT) and the appropriate VAT rate (eg, standard VAT rate or reduced VAT rate). The VAT amount will be calculated automatically for you. If, due to rounding issues, it is different from the figure you have calculated, you can overwrite the VAT amount due.
  6. Add a line for each member state in which you make supplies, with a separate line for standard and reduced VAT rates. The total amount of the return will be calculated automatically.

If a member state changes its VAT rate during a MOSS VAT Return period you will need to enter a separate line for each VAT rate charged in the quarter.

If you don’t make any digital supplies to any EU consumers in a quarter, you must submit a ‘nil return’.

Uploading VAT MOSS Return data

Instead of completing the return online you can download a template from the HMRC website and transfer data from your own system. You can then upload the data on to the VAT MOSS online service. HMRC will validate the information at the point of upload. You will still be able to save an uploaded return for submission later. HMRC will publish specific guidance for using the template early in 2015.

Exchange rates

If you charge or invoice consumers in other member states in a currency other than pound sterling, and you record that price in your business accounts in that currency, you must convert the amount into sterling at the end of each calendar quarter using the conversion rate published by the European Central Bank on the last working day of that quarter.

However, if you automatically convert the foreign currency into sterling using an agreed daily or other periodic rate and you record these sterling amounts in your business accounts, you may use these figures to complete your quarterly VAT MOSS Return.

Correcting a MOSS Return

To adjust your VAT MOSS Return you must submit a correction to the original return using the online service.

  1. From the ‘At a glance’ screen select ‘View VAT Mini One Stop Shop periods’.
  2. You will see a list of tax periods available for correction, select ‘View or amend return’.
  3. Overwrite to increase or decrease the original return details – do not enter a minus figure.

You can make changes to your VAT MOSS Return up to 3 years and 20 days after the end of the relevant period.

MOSS payments

Once you have completed and submitted your quarterly MOSS VAT Return, you must electronically pay HMRC the total amount of the MOSS VAT Return.  You mustn’t send a combined payment for your VAT MOSS and your normal domestic VAT return.  A separate MOSS payment must be made, quoting the payment reference notified to you on submission of the declaration.

The bank account details for VAT MOSS payments will be available early in 2015.

Payment deadlines are:

  • 20 April for quarter ended 31 March
  • 20 July for quarter ended 30 June
  • 20 October for quarter ended 30 September
  • 20 January for quarter ended 31 December

Your payment must reach HMRC on the last working day before the weekend or a bank holiday. The time you need to allow depends on how you pay.

Union VAT MOSS scheme ways to pay:

  • online CHAPS (Clearing House Automated Payment System)
  • Bacs (Bankers automated clearing service)
  • Faster Payments

Non-Union VAT MOSS scheme ways to pay:

You should advise your bank to pay HMRC electronically in pounds sterling, quoting the payment reference notified to you on submission of the declaration.

MOSS underpayments and overpayments

Underpayments

If you haven’t paid, or don’t pay the full amount, HMRC will email you a reminder on the 10th day following the day on which the payment was due. If full payment is still not received following the issue of the reminder, you may be required to make any further payments relating to that return directly to the member state concerned.

Overpayments

If you realise, or you are notified by a tax authority, that you have overpaid the VAT due to the member state(s) in which your consumers are based, that tax authority will refund the overpayment to you in its own currency.

Each member state tax authority operating their own VAT MOSS scheme can keep an administrative handling fee. This is a specified percentage of the VAT due to the other member state. The VAT MOSS tax authority (eg, HMRC for the UK) will deduct this fee before forwarding on the balance to the member state tax authority where the consumer lives. This means that if you have made an overpayment, both the tax authority in the member state of your consumer and HMRC will make separate refunds to you.

Union VAT MOSS scheme recovery of VAT business expenses (input tax)

Arrangements for normal UK VAT registered businesses

The VAT MOSS scheme only allows you to pay VAT on your sales of cross-border digital service supplies. If your business incurs any UK VAT related to those cross-border supplies, you should recover that VAT through your UK domestic VAT return.

Record keeping

A VAT MOSS registered business is required to keep records containing the following information:

  • member state of consumption to which the service is supplied
  • the date of the supply of the service
  • the taxable amount indicating the currency used
  • any subsequent increase or decrease or reduction of the taxable amount
  • the VAT rate applied
  • the amount of VAT payable and the currency used
  • the date and amounts of payments received
  • any payments on account received before the supply of service
  • where an invoice is issued, the information contained on the invoice
  • the name of the customer (where known)
  • the information used to determine the place where the customer is established or has his permanent address or usually resides

The above information must be recorded in such a way that it can be made available by electronic means, without delay, and for each service supplied.

If you use the UK VAT MOSS scheme this does not of itself create a requirement to register as a data controller with the Information Commissioner’s Office (ICO). The normal rules apply which include an exemption for accounts and records, which covers basic customer information. If for any reason the information you hold goes beyond this you may like to check with the ICO if you need to register. Information can be found on the ICO website. If you should need to register the requirement to do so is based on your place of business, and not the location of your customers; so you (as a UK business) will only have to register with the ICO in the UK.

Support for MOSS registered micro-businesses until 30 June 2015

UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (VAT MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider. This means the business need not require further information to be supplied by the customer. As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides, the transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.

Compliance: audit and penalties

HMRC may conduct checks on your business to make sure you’re following the VAT MOSS rules and keeping appropriate records correctly. If you consistently don’t comply with the rules for the scheme, HMRC may exclude you from using the scheme. If this happens you will be sent a message through the online service, and you won’t be able to use the scheme anywhere in the EU for up to 2 years. This means that you will have to register for VAT in each of the EU member states where you make digital supplies to consumers. You will also have to make VAT Returns and VAT payments to each of those member states every quarter.

 

Audit

The tax authority of the member state where you make digital supplies to private consumers has the legal right to audit the records of a business registered for VAT MOSS. The Commission and the vast majority of member states have agreed an audit code of practice to minimise the risk of imposing unreasonable burdens on businesses. This means that normally the tax authority of your home member state will co-ordinate such audit requests and contact the business to discuss the scope and coverage of the audit requirements. It will be possible for an authorised tax official from another member state to attend any audit that is arranged, but the audit team will be led by a UK HMRC official.

Penalties

To resolve disputes and/or pay any penalties or fines, you will be expected to deal directly with the tax authorities in the relevant member state to which you make digital supplies and to make the payments using the currency designated by that member state.

 

You can appoint an accountant to act as your agent for VAT and prepare and submit VAT returns and VAT MOSS returns on your behalf.

Autumn Statement 2014

Posted on By dc_admin

The government expects future growth to come from smaller businesses and targeted a significant proportion of the autumn statement towards them.

Small business measures included reducing employment taxes and encouraging apprenticeship schemes for the under 25s, as well as a review of business rates. Pennies

PERSONAL

INCOME TAX

The personal tax allowance will increase to  £10,600 a year from April 2015. The higher rate threshold will rise from £41,865 this year  to £42,385 next year.

ISAs

The annual ISA allowance will increase to £15,240 a year from April 2015. ISA savings that are inherited by a surviving spouse from a deceased partner will retain their tax-free status.

PENSIONS

The 55% tax on unused inherited pension pots will be scrapped. People who die before they are 75 will be able to pass on joint life or guaranteed term annuities tax free.

RESIDENTIAL PROPERTY STAMP DUTY

The way stamp duty is applied to residential properties will change to a marginal rate system. From midnight on 3 December 2014, rates will only apply to the proportion of the property price that falls within each band. The rate will be 0% on the irst £125,000, rising to 12% on prices above £1.5 million.

BUSINESS

BUSINESS RATES

Small business rate relief will be doubled for another year. The inlation-linked increases to business rates will be capped at 2%. There will be a review of the structure of business rates. The business rates discount for certain high street shops will increase by 50% to £1,500.

RESEARCH AND DEVELOPMENT

Research and development tax credit will increase to 230% for small and medium sized businesses and 11% for large firms.

NATIONAL INSURANCE

Businesses will not have to pay national insurance contributions when they hire apprentices who are under 25, up to the upper earnings limit. National insurance contributions for employing anyone under 21 will be abolished from April 2015.

OTHER ANNOUNCEMENTS

TAX AVOIDANCE

A continued crackdown on tax avoidance and evasion will raise at least £5 billion in the next parliament.

VAT REFUNDS

Hospice charities, search and rescue services, and air ambulances will benefit from VAT refunds.

CARERS

Carers will be included in the employment allowance which reduces employer national insurance contributions by up to £2,000.

FUEL DUTY

The freeze on fuel duty will continue.

The government has published the autumn statement documents here, for anyone who would like more information.   The effect of changes on your own tax situation will depend upon your own circumstances. If you would like to discuss how any changes may affect you or your business please get in touch.

Filing your tax return

Posted on By dc_admin

Filing your tax return

The deadline for individuals to file Self-assessment tax returns on paper has now passed.  Anyone preparing their tax return for the year ended 5th April 2014 must now file it online before 31st January 2015.  Taxpayers often put off preparing their tax return until the Christmas period or later. However, this really doesn’t leave very long to get this completed before the January deadline, and gives you even less scope to plan if there’s a payment due on 31st January too.

smiling teacup

There are several advantages of filing tax returns early.  You can avoid penalties and cash flow problems and you’ll have the opportunity to gain any possible tax refunds sooner.

Tax payment dates remain the same

Your tax payment date is not linked to the date you file the tax return.  The payments are due on 31st July (second payments on account) or 31st January (balance and the first payment on account), regardless of when the tax return is filed.

…but tax refunds are paid earlier

If you file your tax return before the filing deadline, you should receive any tax refund you are due fairly soon after submission. HMRC do not wait until 31stJanuary to pay you. Therefore, if you suspect you have overpaid tax and are due a refund, you should really prepare your tax return as soon as possible so that you can gain the income sooner.  Don’t allow it to sit in HMRC’s bank account, when it could be in yours!

Manage your cash

Once your tax return has been done, and your tax liability calculated, you have time to start saving for the tax bill and to manage your cash flow.  If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.

The other benefit of filing early is that if your tax liability is under £3,000, you pay tax via PAYE and you submit your tax return by 30th December, you can opt to have your tax liability collected through your tax code. This means it will simply be deducted from your wages or pension each week or month.

Reduce errors and plan ahead

If your affairs have changed this year and you have losses, or a significant amount of additional income, then preparing your return early can be an advantage because it gives you the time to consider any tax planning opportunities which could lead to you saving tax.

Furthermore, having plenty of time to prepare your return reduces the risk of errors being made, because you aren’t rushing to get it finished.

Corrections

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 it. For example, for the 2013-14 return you have until 31 January 2016 to make an amendment.

So the earlier you submit your return, the longer you have to make any corrections.

HM Revenue & Customs

Trying to get hold of HMRC can be pretty difficult, but it’s even more difficult around the tax return deadline. So you should really avoid leaving your tax affairs until December or later; just in case you need to speak with the department and cannot get through.

If you are due a tax refund, you’re also likely to experience a longer turnaround time if you file your return during their peak times.

Penalties

There is a £100 automatic penalty payable if your tax return is filed late.

And if your tax return is more than three months late, £10 daily penalties start to accumulate up to a maximum of £900 and there are even harsher penalties if your return is more than six months late- so they could well top £1,000 in all.

Using an accountant will take away the stress of filing tax returns and leave you to concentrate on running your business. Not only should penalties and interest be avoided, but accountants may even be able to save or defer you tax. They can also keep you informed of your tax position and abreast of any changes in the tax regime.

Contact us if you would like help getting your tax return filed on time

 

Posted in Tax

Business mileage expenses – why, what, how?

Posted on By dc_admin

Business mileage expenses explained

It’s very simple to record, can save you tax, and contributes to an accurate set of accounts and tax return.  So why do I meet so many people who don’t do it?

What is business mileage?

Any journey you make solely for the purpose of business. Examples include travelling to visit customers, suppliers, to attend work-related training events and business banking.   It does not include commuting to your normal place of work.  If you drop off the business post on the way home from your office, you can’t count that as a business trip.

Why record business mileage?

Keeping sufficient financial records is a legal obligation. The benefit to you is in claiming this tax free expense.  Say you travel an average of 20 business miles per day, 4 days per week, 48 weeks per year.  At 45p per mile that could save you £345 per year in tax at the current basic rate.  So what’s stopping you?

It’s a choreBusiness mileage

Well, I can’t argue with that.  It’s not much fun, but it really doesn’t take long and quickly becomes a habit you’ll barely notice.  All you need to do is keep a notebook and pen in the vehicle you use for business, or use your smartphone.

I haven’t got time

10 seconds spent jotting down the details at the end of the trip and it’s done.  You can link several business trips together. So if you start at your business premises one day and travel to a customer’s premises, then go to a 2nd customer, then onto the stationers to pick up some flyers you’ve had printed, and drop off the flyers at the distribution company, that can all be recorded as one trip.

I forget

I believe you.  I also know you’re doing your best to run a successful business, often under very difficult circumstances.  So find a way to integrate the recording of business mileage into your daily or weekly routine.

Give me an easy solution

There are 2 options for tracking mileage.  You can use the old paper and pen method, or use one of the many apps that are available now.

For each trip your paper record needs to show:

  • The date

    business mileage
    Mileage record made simple
  • details of where you’re going to and from
  • the reason for the trip and
  • the business mileage.

There are mobile apps which are appropriate for UK taxpayers Most will deal with more than just mileage. Try Concur,  Eclipsecs, Webexpenses or search for an app that will record mileage.

A note on the value of your business mileage expense claims: there is more than one method of calculating mileage expenses, although there are certain restrictions.  Have a chat with your accountant or contact us to find out which is best for you.