Category: ‘Uncategorized’

Enhanced redundancy cover for parents

Tuesday, August 6th, 2019

The present legal protections against redundancy is to be extended by six months for new mothers returning to work. Parents returning from adoption and shared parental leave will also be protected.

The move comes in response to a government consultation which found that new parents continue to face unfair discrimination. Research estimates that up to 54,000 women a year felt they had to leave their jobs due to pregnancy or maternity discrimination.

Employers should note that pregnancy and maternity discrimination is illegal, and those on maternity leave have special protection in a redundancy situation. The reforms recently announced will, for the first-time, extend the redundancy protection for six months from the date of a mother’s return to work as well as covering those taking adoption or shared parental leave. This will help ensure new parents are protected from discrimination in the workplace, regardless of gender and circumstance.

Today’s announcement follows a raft of recent measures designed to support working parents, as part of the government Good Work Plan. These include proposed new leave entitlements for parents of sick and premature babies and proposed new measures to ensure large businesses are more transparent on their policies for parental leave and pay and flexible working.

Research commissioned by the Department for Business, Energy and Industrial Strategy (BEIS), found that one in nine women said they had been fired or made redundant when they returned to work after having a child, or were treated so badly they felt forced out of their job.

This change goes further than current EU requirements on maternity entitlements and parental leave.

According to government sources, the aim of this change in redundancy protection is for UK businesses to embrace flexible working and gender equality as this will make it easier for mothers and fathers to return to work and progress in their careers after parental leave.

Changes to private residence relief

Friday, August 2nd, 2019

If you rent out all or part of your home this may create a Capital Gains Tax (CGT) charge when you sell the property.

Presently, HMRC excludes the last 18 months of your ownership – even if the property is let for this time – when assessing any CGT liability. In a draft of the Finance Bill released last month, HMRC have confirmed that this 18 month period will be reduced to 9 months from April 2020.

The exemption for disabled property owners or those in a care home will continue to be 36 months.

The draft Finance Bill also confirms a change to the letting relief rules.

Letting relief is an extra deduction you can make from any CGT payable as a result of letting your home. You can claim the lowest of the following three amounts:

  1. The same amount that you can claim as private residence relief.
  2. £40,000.
  3. The same amount as the chargeable gain you made from letting your home.

From April 2020, you will only be able to claim this letting relief if you are in shared occupancy with the tenant.

Property owners contemplating the disposal of their home – which is or has been let for any period – may be advised to complete their sale before April 2020. In this way they will benefit from the 18 month exemption and the more flexible lettings relief.

Internet giants face tax-hike

Friday, August 2nd, 2019

It has been confirmed that from April 2020, the government will introduce a new 2% Digital Services Tax (DST) on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.

This is an attempt to tax, in the UK, revenues earned by these social media platforms from customers resident in the UK. At present, significant profits are being earned in the UK but transferred off-shore thus avoiding UK taxation.

In the notes confirming that these changes would be included in the Finance Bill 2019, HMRC said:

The revenues from the business activity – subject to DST – will include any revenue earned by the group, which is connected to the business activity, irrespective of how the business monetises the platform. If revenues are attributable to the business activity and another activity, the business will need to apportion the revenue to each activity on a just and reasonable basis.

A UK user is a user that is normally located in the UK.

The Digital Services Tax will apply to businesses that provide a social media platform, search engine or an online marketplace to UK users. These businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.

Low paid workers to qualify for sick-pay

Friday, August 2nd, 2019

The government has started a consultation to transform support for sick and disabled staff and remove barriers for employees.

The Department for Work and Pensions has recently set out new measures to transform how employers support and retain disabled staff and those with a health condition.

Under the new measures the lowest paid employees would be eligible for Statutory Sick Pay (SSP) for the first time, while small businesses may be offered a sick pay rebate to reward those who effectively manage employees on sick leave and help them get back to work.

Under current legislation, to be eligible to receive SSP you must:

  • be classed as an employee and have undertaken work for your employer,
  • have been ill for at least 4 days in a row (including non-working days),
  • earn an average of at least £118 per week, and
  • tell your employer you’re sick before their deadline – or within 7 days if they do not have one.

Each year more than 100,000 people leave their job following a period of sickness absence lasting at least 4 weeks, and the longer someone is on sickness absence the more likely they are to fall out of work, with 44% of people who had been off sick for a year leaving employment altogether.

Changes to the Construction Industry Scheme (CIS)

Friday, August 2nd, 2019

Domestic reverse charge VAT for construction services

HMRC’s new domestic reverse charge for construction services comes into force on 1 October 2019. 

From this point, a VAT-registered business that supplies certain construction services to another VAT-registered business for onward sale needs to issue a VAT invoice stating the service is subject to the domestic reverse charge.

However, the recipient must account for the VAT due on that supply through its VAT return, instead of paying the VAT amount to the supplier. The recipient may then recover the VAT as input tax, subject to the normal rules.

Unlike other types of reverse charge, the value of such reverse charge services will not count towards the VAT-registration threshold, which is good news for smaller businesses.

The new domestic reverse charge will apply to supplies of ‘specified services’.

Among the specified services included are construction, alteration, repair, extension, painting and decorating, plus demolition, civil engineering and the installation of heating, lighting and air conditioning.

Some services will not fall within the scope of the domestic reverse charge.

Where there is a reverse charge element anywhere in a supply chain, however, then the whole supply may be subject to the domestic reverse charge.

Preparation

Construction businesses will need to ensure their accounting systems are capable of processing reverse charge supplies.

As the VAT amount must still be shown on invoices subject to the domestic reverse charge, there is a risk that suppliers will still account for the VAT to HMRC in error and likewise customers will still recover it from the Revenue.   

Subcontractors that rely on VAT collected from their customers as working capital until they have to remit it to HMRC are likely to suffer from the loss of cashflow.

These businesses will need to consider if payment terms need to be revisited to avoid any problems in the supply chain this could cause.

Before these new rules take effect, construction businesses would be wise to:

  • review supplies provided to, and received from, other VAT-registered contractors to establish where these will be subject to a reverse charge from October 2019
  • obtain notification from customers, with details of their VAT-registration status, construction industry scheme status, and confirmation that they are the end-user
  • consider any adaptations required to ensure accounting systems can deal with this change
  • reflect on the negative effect on cashflow from October 2019, and ways to mitigate it.

A more detailed explanation of how the CIS works can be found in our Practice Update HERE

A new business, have you considered your options?

Tuesday, July 30th, 2019

If you are setting up a new business one of the options, you will need to consider is your business structure. There are two basic choices:

  1. Be self-employed, or
  2. Incorporate your business, be a limited company.

There is a world of difference between the two options.

Self-employed

Self-employed suggests that you work on your own, and this is certainly one self-employed option, but there are others.

You could have a business partner, or partners, and trade as self-employed but in a formal partnership arrangement. There are two basic types of partnership: a limited partnership (where the partners are not personally liable for any business risks) and a non-limited version where the partners’ personal assets are at risk in the event that the business cannot pay its debts.

This personal liability aspect is one of the key reasons that need to be considered when deciding on a structure for your business. The other is the impact of NIC and income tax.

If you are self-employed the profits of the business are taxable based on the tax status of the business owner or owners. There is no flat rate applied to business profits. The more you earn, the more NIC and income tax you will pay. And don’t forget, if you are self-employed and you run into financial difficulties, your personal assets may be at risk – unless you have opted for the Limited Liability Partnership arrangement.

A limited company

Alternatively, you could set up a limited company that is treated as a legal entity in its own right. Companies pay corporation tax, not income tax, at a single rate, presently 19%.

At first sight it may seem like a no-brainer, why would you be self-employed and pay much higher rates of NIC and income tax? Combine this with the limited liability aspect and the argument for trading as limited seems compelling.

Planning is key

Every potential new business-person should consider both options. There are pluses and minuses to each, and both need to be considered.

If you are thinking about a new business, perhaps your first venture into self-employment, please call so we can help you consider all the possibilities. This is not a process to be taken lightly and messing up could prove to be very expensive.

The advantages of tax compliance support?

Tuesday, July 23rd, 2019

As UK resident persons we are obliged to comply with the law, if we don’t, there are consequences. These range from financial penalties to imprisonment.

Tax compliance covers areas such as submitting returns to HMRC by the required dates and observing certain disclosure rules if our personal or financial circumstances change in a particular way. For most of us this means submitting an annual tax return and paying any calculated tax, NIC or VAT liabilities as they fall due.

For most taxpayers this s a chore that cannot be avoided, and it is tempting to see any investment in professional fees to complete these returns as a cost. As advisors we have sympathy with this point of view and yet there are compelling reasons to view this compliance service as beneficial, as an investment not a cost.

Firstly, if you don’t have to complete and fret over what does and what does not need to be returned, you will have more time to spend on activity that furthers your business interests or gives you more time to spend with your family. It will also, we hope, give you comfort that your affairs are being handled professionally – the sleep better at night outcome.

Secondly, an impartial review of your tax affairs – in order to deal with your compliance obligations – may reveal opportunities to change the way you organise your business or personal financial affairs in order to reduce the impact of taxation.

Timing is also an issue. There are compelling reasons to have advance notice of tax payments. For example, our self-assessment tax returns do not need to be submitted until 31 January following the end of a particular tax year. So, for the tax year 2018-19, the filing deadline is 31 January 2020. Why leave completing your return until the last minute if this means you have no time to figure how you are going to fund tax payments due?

Tax compliance, if managed correctly, is much more than a rubber-stamping activity, and hopefully, this post will convince you that your investment in the process has advantages that will justify your investment. Please call if you need help with your tax compliance obligations.

It is business as usual at the Treasury

Wednesday, July 17th, 2019

With all the present upheavals in UK politics it is reassuring that for one government department, the Treasury, it’s business as usual.

Ordinarily, we would expect the next Budget to be presented to parliament in the autumn, usually November. As part of the Budget 2018, certain changes to the tax code were disclosed in advance of their expected implementation, April 2020.

These future changes have now been published as draft clauses for the 2019 Finance Bill.

In their recent press release, HMRC have confirmed:

The government is today (11 July 2019) publishing draft legislation for the next Finance Bill to deliver on our Budget 2018 commitment to a competitive and fair tax system, including updating tax policies for the digital age by ensuring large digital companies pay their fair share through a world-leading Digital Services Tax.

This Finance Bill, published in draft form today, ensures that from April [2020] next year:

  • large digital businesses pay a new Digital Services Tax that reflects the value derived from their UK users,
  • off-payroll working rules will ensure that two people working side by side in a similar role for the same employer pay the same employment taxes,
  • when a business becomes insolvent, more of the taxes paid in good faith by its employees and customers will go to fund public services as intended, rather than being distributed to other creditors such as financial institutions.

The consultations on the draft legislation will run until 5 September, with measures included in the next Finance Bill.

Apart from the above and a multitude of technical changes to be included in the Finance Bill 2019, there are also changes to Private Residence Relief for capital gains tax purposes. The mooted changes are listed below.

The measures make a number of changes to Capital Gains Tax private residence relief (PRR) where individuals have more than one residence.

  • It reduces final period exemption from 18 months to 9 months (there are no changes to the 36 months that are available to disabled persons or those in a care home) and
  • reforms lettings relief so that it only applies in those circumstances where the owner of the property is in shared-occupancy with a tenant.

And no doubt there will be more content added to the Finance Bill as the Brexit process unwinds.

What is Goodwill?

Thursday, July 11th, 2019

According to the dictionary goodwill is:

1. a feeling of benevolence, approval, and kindly interest

2. (modifier) resulting from, showing, or designed to show goodwill: the government sent a goodwill mission toMoscow.

3. willingness or acquiescence

4. (Accounting & Book-keeping) accounting an intangible asset taken into account in assessing the value of anenterprise and reflecting its commercial reputation, customer connections, etc

Goodwill, as discussed in this post, is the intangible asset, that amount that a buyer is willing to pay for your business over and above the valuation of physical assets (plant, equipment, stock, property and net working capital).

If you have a business, goodwill is a payment a buyer is prepared to pay for your customer list and the reputation that your business may have built over the years.

Valuing goodwill is a tricky process as it necessarily involves consideration of intangible items. Ultimately, the agreed valuation will be the amount someone is prepared to pay, and the amount you are prepared to accept.

How is the sale of goodwill treated for tax purposes?

A company or person selling goodwill will create a taxable gain. If possible, sole-traders, partners or shareholders would seek to have this gain taxed under the capital gains tax legislation and claim reliefs that would restrict any tax payable to 10% of the chargeable gain.

HMRC, on the other hand, would prefer that any gain is taxed as income, and subject to the much higher income tax rates.

These opposing points of view can make for lengthy and complex arguments that often play out in the courts.

Goodwill is a payment for the hard work that you have committed to your business and you will want to plan for any sale with an eye to any tax payable, which is why planning a sale is a must-do. Very often the way that you structure a sale, and its timing, will determine the tax outcome.

As with most tax planning this process should be completed before contracts for sale are signed.

Readers contemplating a sale should invest in professional advice. In this way you will maximise the amount you receive for goodwill and minimise any tax liabilities. Please call if you would like to discuss your options, we can help.

Filing documents with Companies House

Tuesday, July 9th, 2019

In the not too distant past, if you filed a set of accounts for a registered company with Companies House this usually involved sending the required documents using the postal system.

Inevitably, this involved a certain amount of delay: initially, for the package to find its way from your location to Companies House, and then for the document to be opened and processed. Which is fine if allowed plenty of time for delivery to complete or to send a replacement set of documents if the item was “lost in the post”.

Clearly, leaving this process to the last minute is a recipe for disaster as there are now fines if you fail to file accounts or other documents by the required filing deadlines.

Fortunately, Companies House now has an online filing portal which means you can file using an electronic version of your accounts; no more fretting about the postal system.

From 1 October 2019, Companies House are updating their internal guidance which dictates how they will respond to appeals against late filing penalties.

In a recent press release Companies House offered the following advice to companies:

We remind all customers to:

  • plan ahead – do not leave your accounts until the last minute
  • make sure your accounts are correct before you file them
  • check the status of all documents you’ve filed using Companies House service

You should also use our online filing service wherever possible. It:

  • is quicker to complete and register (it can take around 10 days to process paper accounts at peak times)
  • uses less paper and is more environmentally friendly
  • lowers your risk of getting a penalty, as companies receive electronic confirmation that we’ve received your accounts and if they’ve been accepted or rejected
  • has lower rejection rates than paper filed accounts (0.5% for electronic accounts against 6% for paper filed accounts)

Clients reading this update will be relieved to note that we do file accounts – where this is possible – online.

For those readers who still rely on the postal system please give yourself plenty of time, failure to meet the required deadlines can result in significant financial penalties. Currently they are:

  • £150 – if less than one month late
  • £375 – if more than one month but less than three months late
  • £750 – if more than three months but less than six months late
  • £1,500 – if more than six months late

The above penalties automatically apply to all overdue accounts. Failure to comply with the filing requirements for the previous financial year will result in the above penalty being doubled.

And don’t forget:

A private company has 9 months from the end of the accounting reference period in which to deliver its accounts, and if you change the accounting reference period the filing time may be reduced.

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