News
| 07-03-2024
The Carer’s Leave Act comes into force on 6 April 2024, which will affect all employers in the UK. Then the Act gives them the right to unpaid leave to give or arrange care. The dependent can be anyone who relies on them for care and not just a family
| 07-03-2024
According to MPs, phone line waiting times for HM Revenue and Customs (HMRC) continue to worsen. A committee found that nearly two-thirds of callers had to wait more than 10 minutes to speak to an adviser.
| 07-03-2024
With the tax year ending on 5 April, March is a good month to check whether sharing unused tax allowances with your partner could save you some money. HM Revenue and Customs (HMRC) say that March is the most popular month for Marriage Allowance applications.
| 07-03-2024
Value Added Tax (VAT) is a significant consideration for businesses. It impacts your cash flow, the amount of admin work needed, and even your overall profitability. One option available to businesses - with a VAT
| 07-03-2024
Starting on 4 February 2024, HMRC is writing to company owners regarding the potential under declaration of dividend income. The correspondence is prompted by a decrease in company reserves despite reported profits, hinting at undisclosed dividend payouts.
| 27-02-2024
In an announcement made on 19 February, the government confirmed that twin-cab pickup vehicles with payloads of 1 tonne or more will continue to be treated as goods vehicles for both capital allowances and benefit-in-kind purposes.
| 27-02-2024
In November 2023’s Autumn Statement, the government announced some National Insurance (NI) changes. Some of these changes went into effect in January 2024, whereas others will come into effect on 6 April 2024. Here is a reminder of the changes.
| 27-02-2024
Last Tuesday, the government named and shamed 524 businesses for failing to pay the minimum wage to their staff. These failures amounted to a total of nearly £16 million that had not been paid to their workers. Each of the employers named has had to repay their staff for the
| 27-02-2024
The Advisory, Conciliation and Arbitration Service (ACAS) has released a final draft of a new Code of Practice on requests for flexible working. The draft Code
| 27-02-2024
Companies House have reviewed the fees they charge and have released details of the new charges that will apply from 1 May 2024. Companies House work on a cost recovery basis, so the fees are set to cover their costs rather than to make a profit.
| 27-02-2024
When starting a business, or indeed as an established business, choosing the most suitable legal structure for your business is an important thing to consider. Two popular options are
| 19-02-2024
What are the benefits of cloud accounting? Accessibility Traditional accounting systems often tie businesses to a specific location, requiring users to be physically present in the office to be able to access financial data
| 07-02-2024
The Government plans to introduce new legislation to help parents who earn more money than others with their future pensions. In essence, if you did not claim child benefit because
| 07-02-2024
HM Revenue & Customs (HMRC) has made a significant change to the way that some taxpayers access its alternative dispute resolution (ADR) scheme. Where applicants for ADR could
| 07-02-2024
Businesses may be able to reclaim significant amounts of National Insurance Contributions (NICs) and plan for future savings because of a recent Tribunal ruling on how car allowances
| 07-02-2024
Are you a sole trader or a member of a partnership? Here is what you need to know about the upcoming tax basis period reforms. HM Revenue & Customs (HMRC) is introducing changes to how it assesses and collects
| 31-01-2024
Unlocking your business value: Strategies for Growth. According to consultancy Cornwall Insight, domestic energy prices are predicted to drop in April with analysts predicting that there could be a further fall in
| 31-01-2024
The National Cyber Security Centre (NCSC) is providing a funded Cyber Essentials programme to help small businesses in certain sectors across the UK implement essential security controls. While all
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The Carer’s Leave Act comes into force on 6 April 2024, which will affect all employers in the UK.
If an employee has a dependent with:
· An illness or injury (mental or physical) that means they are expected to need care for more than 3 months, or
· A disability that’s defined as such by the Equality Act 2010, or
· Care needs because of their old age,
Then the Act gives them the right to unpaid leave to give or arrange care.
The dependent can be anyone who relies on them for care and not just a family member.
The entitlement to carer’s leave exists from an employee’s first day of work, and their holiday and returning to their job rights, as well as other employment rights, are protected during the leave.
Employees can take up to one week (pro rated for part-timers) of leave every 12 months, and this can leave can be taken in a block or split into individual or half days throughout the year.
The leave entitlement is per employee and not per dependent. Employees who need leave to look after their child can take up to 18 weeks, but this is separate to carer’s leave.
Employees are required to give notice when they want leave, and the Act sets out minimum notice periods. The request does not have to be in writing, and employees don’t have to provide evidence of the care needs.
The Act also sets out when an employer can delay carer’s leave. For more information, see: https://www.gov.uk/carers-leave
According to MPs, phone line waiting times for HM Revenue and Customs (HMRC) continue to worsen. A committee found that nearly two-thirds of callers had to wait more than 10 minutes to speak to an adviser.
The Public Accounts Committee’s report says that in the year to April 2023, the average wait for a call to HMRC to be answered was 16 minutes and 24 seconds. This compares to 12 minutes and 22 seconds the year before.
63% of callers waited more than 10 minutes, increasing from 46% the previous year. This proportion has increased each year since 2018-19.
HMRC’s hold music holds the dubious honour of being among the most streamed!
The issue shows no sign of an easy resolution. HMRC is focusing its attention on digital services such as its app and online services to deal with enquiries.
HMRC have said they received more than three million calls on resetting online passwords, getting tax codes, and checking National Insurance numbers, many of which could have been handled using their digital services instead of calling.
The take home seems to be that if you need to call HMRC, it may be best to do so from an easy chair with a coffee in hand! See: https://www.bbc.co.uk/news/business-68413088
With the tax year ending on 5 April, March is a good month to check whether sharing unused tax allowances with your partner could save you some money.
HM Revenue and Customs (HMRC) say that March is the most popular month for Marriage Allowance applications. Almost 70,000 couples applied in March last year. As there is also the option to backdate their claim for the previous 4 tax years, eligible couples who have not previously claimed could receive a lump sum payment of more than £1,000.
Marriage allowance allows individuals to transfer up to 10% of their tax-free Personal Allowance to their husband, wife, or civil partner. For the 2023/24 tax year, this means a maximum amount of £252 could be available to those who qualify.
In order to benefit, either you or your partner must have an annual income of less than the Personal Allowance, which is currently £12,570. And the higher earning partner’s income must be between £12,571 and £50,270. If you live in Scotland, the higher earning partner’s income must be between £12,571 and £43,662.
To find out if you are eligible, you can use HMRC’s online calculator at https://www.tax.service.gov.uk/marriage-allowance-application/benefit-calculator
If you need any help working out whether you are eligible or in applying for the allowance, please do not hesitate to contact us!
Value Added Tax (VAT) is a significant consideration for businesses. It impacts your cash flow, the amount of admin work needed, and even your overall profitability. One option available to businesses – with a VAT exclusive turnover of £150,000 or less – is the VAT Flat Rate Scheme (FRS), which offers a simplified approach to VAT accounting. However, deciding whether to adopt this scheme requires careful consideration of its benefits and drawbacks.
The VAT Flat Rate Scheme operates by applying a fixed percentage to your turnover to determine the VAT payable to HM Revenue and Customs (HMRC). This fixed rate varies depending on the industry sector that your business operates in. While this simplicity can be appealing, it’s crucial for businesses to evaluate whether this scheme aligns with their specific circumstances.
The advantages
One of the primary advantages of the VAT Flat Rate Scheme is how simple it is to operate. Unlike traditional VAT accounting, where businesses need to track VAT on sales and purchases separately, FRS simplifies this process by applying a flat rate to the total turnover. This can save time and reduce the administrative burden, and if you run a smaller business this can be a big help!
Businesses under the VAT Flat Rate Scheme can also benefit from potentially paying less VAT to HMRC compared to the traditional accounting methods of accounting for VAT. The scheme allows for your business to keep the difference between the VAT charged to customers and the VAT paid to HMRC, which can provide an additional margin for your business.
The disadvantages
However, while the VAT Flat Rate Scheme offers simplicity and potential cost savings, it may not be suitable for all businesses. One of the notable drawbacks is the inability to reclaim VAT on purchases, except for certain capital assets over £2,000. This means that if your business buys in a lot of supplies where you pay VAT on them, you may not benefit from the scheme as much as others.
Additionally, the fixed rates provided by HMRC may not always accurately reflect your business’s specific VAT position. While these rates are designed to approximate the average VAT payable for different industries, businesses with atypical cost structures or profit margins may find themselves disadvantaged by the scheme.
Furthermore, you need to consider the future growth of your business and how this might impact your VAT liabilities under the Flat Rate Scheme. As turnover increases, the fixed percentage applied to turnover may result in higher VAT payments compared to the traditional methods of accounting for VAT. This could potentially erode the scheme’s cost-saving benefits.
Before deciding whether to adopt the VAT Flat Rate Scheme, it is important that you carefully evaluate your current VAT position, including the proportion of VATable sales and purchases, as well as any potential future changes in turnover.
We have tools that can help you decide whether joining or leaving the Flat Rate Scheme is a good choice for your business. Please feel free to get in touch with us.
We would be happy to help you!
Starting on 4 February 2024, HMRC is writing to company owners regarding the potential under declaration of dividend income.
The correspondence is prompted by a decrease in company reserves despite reported profits, hinting at undisclosed dividend payouts. Recipients are urged to acknowledge the letter by either disclosing any unreported dividend income or confirming no additional income exists.
For those with undeclared income, HMRC recommends utilising an online disclosure facility. The process involves registering, receiving a payment reference number (PRN) by mail, and using the same online platform to settle dues, encompassing interest and penalties, within 90 days of receiving the PRN.
The letter does not mention alternative reporting avenues like the contractual disclosure facility, which is more suitable for instances of tax fraud. If recipients assert that they have no additional income, they can communicate this to HMRC via the provided telephone number or email.
Failure to respond may lead to HMRC initiating a compliance check, potentially resulting in heightened penalties. This outreach once again reiterates the importance of prompt and accurate income reporting.
In an announcement made on 19 February, the government confirmed that twin-cab pickup vehicles with payloads of 1 tonne or more will continue to be treated as goods vehicles for both capital allowances and benefit-in-kind purposes.
This is an example of what has become known as a ‘U-turn’. On 12 February, HM Revenue & Customs (HMRC) had updated its guidance on the tax treatment of twin-cab pickups following a 2020 Court of Appeal judgment. The guidance had confirmed that, from 1 July 2024, twin-cab pickups with a payload of one tonne or more would be treated as cars rather than goods vehicles for both capital allowances and benefit-in-kind purposes.
The updated treatment was extremely unpopular because goods vehicles attract more beneficial tax treatment than cars. For example, a business buying a goods vehicle is able to claim more tax relief, in the form of capital allowances, than if it were to buy a car. Similarly, if an employee were provided with an employer-owned vehicle, the income tax and employer’s National Insurance charge on the benefit-in-kind would be lower on a goods vehicle than on a car.
The government says that it has listened to carefully to views from the farming and motoring industries and has U-turned because the 12 February guidance update “could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses”.
The U-turn means that that the capital allowances and benefit-in-kind tax treatment of twin-cab pickups with payloads of 1 tonne or more will continue to be aligned with the VAT treatment. For more information, see: Update on HMRC Double Cab Pick Up Guidance – GOV.UK (www.gov.uk)
In November 2023’s Autumn Statement, the government announced some National Insurance (NI) changes. Some of these changes went into effect in January 2024, whereas others will come into effect on 6 April 2024. Here is a reminder of the changes.
Cut to the main rate of Class 1 employee NI contributions from 12% to 10%
This reduction received the most headlines. This change went into effect from 6 January 2024, and you have likely already made this adjustment.
In some cases, employers were not able to make the change in time due to software not being ready. If that is the case for you then an incorrect amount of NI will have been deducted from your employees and this will need correcting. Details on how to do so are here: https://www.gov.uk/payroll-errors/correcting-your-fps-or-eps But, please feel free to contact us if you need any help.
HM Revenue and Customs (HMRC) have recently confirmed that the 2% cut also applies to the married woman’s reduced rate of NI contributions, where the rate has dropped from 5.85% to 3.85%. The married woman’s reduced rate of NI contributions applies to married women who opted in before the scheme ended in April 1977.
Cut to the main rate of Class 4 self-employed NI contributions from 9% to 8%
Class 4 NI applies to the taxable profits of a self-employed business. It is calculated when your self-assessment tax return is prepared and collected as part of your income tax bill.
This cut comes into effect for profits earned from 6 April 2024 onwards. There is nothing you need to do to benefit from this cut, it will be automatically applied when your tax bill is calculated.
Removal of liability to pay Class 2 self-employed NI
Sometimes known as the self-employed ‘stamp’, Class 2 NI has been a feature for self-employed taxpayers for many years. It is quoted by HMRC as a weekly rate (£3.45 per week for the 2023/24 tax year) and is usually collected as part of your self-assessment tax bill.
From 6 April 2024 the liability to pay this has been removed. For 2024/25, if your trade profits are above £6,725, you will accrue entitlement to state benefits without paying Class 2 NICs so the charge effectively becomes £nil. However, if your trade profits are below £6,725 and you wish to continue accruing entitlement to state benefits, you’ll need to pay class 2 NICs on a voluntary basis.
If you have any concerns or questions about the NI you are paying, please contact us, we will be happy to help you!
Last Tuesday, the government named and shamed 524 businesses for failing to pay the minimum wage to their staff.
These failures amounted to a total of nearly £16 million that had not been paid to their workers. Each of the employers named has had to repay their staff for the shortfall and have also faced financial penalties of up to 200% of their underpayment.
The list includes businesses of all sizes, including some major high street brands. For instance, Estee Lauder, Easyjet, Greggs, Moss Bros, Currys, and NHS Highland all appear on the list.
It is clear that the government will take enforcement action against employers that do not pay their staff correctly. Since it can be easy to unintentionally underpay a worker, such as when they hit 18 or 21 when there is a mandatory increase, it is a good idea to regularly review your payment rates.
This is especially important as we come to the start of a new tax year on 6th April as the rates of pay are increasing as set out in the table below.
|
2023/24 rate |
2024/25 rate |
| National Living Wage 21 and over (previously 23 and over) |
£10.42 |
£11.44 |
| 18 to 20 |
£7.49 |
£8.60 |
| Under 18 |
£5.28 |
£6.40 |
| Apprentice |
£5.28 |
£6.40 |
| Accommodation Offset |
£9.10 |
£9.99 |
If you need any help with your payroll or reviewing whether your wage payments are correct please feel free to contact us we would be happy to help you!
See: https://www.gov.uk/government/news/over-500-companies-named-for-not-paying-minimum-wage
The Advisory, Conciliation and Arbitration Service (ACAS) has released a final draft of a new Code of Practice on requests for flexible working. The draft Code received consultation in 2023 and is now awaiting parliamentary approval. If it is approved, then the new Code is expected to come into force in April 2024.
Flexible working refers to any working arrangement that meets the needs of the employee and employer on where, when, and how an employee works. This would include part-time work, homeworking, hybrid working, job sharing, compressed hours, term-time working and so on.
Employers and employees can make informal arrangements, but if an employee makes a statutory request for flexible working, then the Code must be followed.
The new Code introduces a number of new changes. These include:
Right to request
An employee will now have a statutory right to request flexible working from the first day of their employment. Currently they cannot do so until they have given 26 weeks of employment service.
Currently there is a limit of one request that an employee can make in any 12 month period. However, under the new Code they will be able to make two statutory requests in any 12-month period, with a maximum of one live at any one time.
Handling a request
Currently, employers are required to consider a request and can reject it on the basis of a business reason that is set out in the Employment Rights Act 1996. The new Code is more positive and specifically states: “Employers must agree to a flexible working request unless there is a genuine business reason not to”. The business reasons for rejecting a request continue to be those set out in the legislation.
The new Code introduces requirements to prevent discrimination where a request is because an employee is seeking a reasonable adjustment because of a disability.
While the current Code encourages a discussion with the employee, particularly where the employer rejects or wants to modify the request, the new code specifies that unless the employer decides to agree to the employee’s written request in full, they must now consult the employee. The new Code provides guidance on how the meeting should be held and its content.
The new Code requires that a request be decided on within a statutory two-month period including any appeal. Currently three months are allowed. The new Code also now specifies that the decision is communicated in writing and what this should contain. It also sets out appeal procedures.
Until the new Code receives parliamentary approach, then any statutory requests you receive can still be handled in accordance with the current Code of Practice (https://www.acas.org.uk/acas-code-of-practice-on-flexible-working-requests/html)
However, with parliamentary approval expected by April, it would be well to be prepared with your policies.
To review the new Code of Practice, please see: https://www.acas.org.uk/acas-code-of-practice-on-flexible-working-requests/2024
Companies House have reviewed the fees they charge and have released details of the new charges that will apply from 1 May 2024.
Companies House work on a cost recovery basis, so the fees are set to cover their costs rather than to make a profit. Due to the measures introduced by the Economic Crime and Corporate Transparency (ECCT) Bill, costs for Companies House are increasing and so the fees are being adjusted in part to cover this.
The increases are quite significant. For instance, the fee for an annual confirmation statement, if submitted digitally, will rise to £34. The cost is currently £13. Depending on your current filing date, it may be worth filing early to pay the lower fee one last time.
For a full list of the prices from 1 May 2024, see: https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/
When starting a business, or indeed as an established business, choosing the most suitable legal structure for your business is an important thing to consider. Two popular options are operating as a sole trader or forming a limited company. Each of these options comes with its own set of pros and cons, especially when it comes to tax.
Sole trader:
Pros:
- Less administration: Operating as a sole trader is straightforward and involves minimal paperwork. You have no need to register with Companies House either. So, this is an attractive option if you are looking to start a small business quickly and want to keep your administrative work to a minimum.
- Tax reporting is simpler: Tax reporting is relatively simple for sole traders. Income tax and National Insurance contributions are calculated based on the profits your business makes. The process is usually less complex than if you were dealing with company tax.
Cons:
- Unlimited liability: Perhaps the most significant drawback of operating as a sole trader is that there is no legal distinction between the business and you as an owner. This means you are personally liable for any debts or legal claims against the business and means that your personal assets could be at risk.
- Tax disadvantages: While the simplicity of tax reporting is a pro, it can also be a con in some cases. Sole traders may miss out on certain tax advantages available to limited companies, for instance dividend payments and more flexible salary arrangements.
Limited company
Pros:
- Limited liability: One of the most significant advantages of forming a limited company is that your business and personal assets can be separated. Owning shares in a limited company means that your liability is limited to the amount invested in the company, and this can provide a layer of protection for your personal assets.
- Tax Efficiency: Limited companies often benefit from more tax-efficient structures. For example, as an owner, you can pay yourself through a combination of salary and dividends, which may result in lower overall tax liabilities compared to sole traders, who pay income tax and national insurance on all profits.
Cons:
- Administrative Burden: Limited companies are subject to more regulatory requirements and administrative tasks. This includes filing annual accounts, maintaining company records, and complying with legal obligations set out by Companies House.
- Tax is more complex: While limited companies can enjoy tax advantages, navigating all the rules that relate to companies can be complex. There is usually more work to do when it comes to withdrawing money from the company, for instance you may need to set up and run a payroll to draw a salary, or to document dividend payments.
In conclusion, deciding whether to operate as a sole trader or a limited company involves careful consideration of various factors, including the tax implications. Sole traders benefit from simplicity but face unlimited liability and potential tax disadvantages. On the other hand, limited companies offer limited liability and potential tax efficiency but come with a greater administrative burden and complexity.
If you are considering which of these options is best for you and would like to know more about what is involved or want to know how the tax costs of being a sole trader or a limited company compare, please feel free to contact us. We have helped many businesses reach a decision on their legal structure and would be happy to help you!
In business, staying ahead of, or at least up with, the curve is crucial for success. Over recent years, one of the revolutionary tools that has transformed the way businesses manage their finances is cloud accounting. Cloud accounting offers many benefits over traditional, on-premise accounting systems. Let’s discuss some of them.
What are the benefits of cloud accounting?
Accessibility Traditional accounting systems often tie businesses to a specific location, requiring users to be physically present in the office to be able to access financial data. Cloud accounting frees a business from this constraint. It gives users access to real-time financial information anytime, anywhere. This kind of flexibility and access can be very valuable, allowing teams to collaborate and decisions to be made regardless of location.
Cost efficiency Cloud accounting operates on a subscription-based model, avoiding the up-front software licence costs usually involved in traditional accounting systems. Cloud accounting systems also typically receive automatic updates and maintenance, which can reduce the demand for IT support.
Security The security of financial information is naturally a top concern for a business. Cloud accounting providers use advanced encryption measures to ensure that sensitive information is kept safe. These providers usually have dedicated teams focused on monitoring and addressing security threats too. This provides a level of protection that may be difficult to replicate on your own premises. Cloud accounting systems also include robust backup processes, which reduce the risk of losing data because of hardware failing.
Automation With many cloud accounting systems – or by means of subscribing to linked automated data entry software – data entry can be automated. By uploading a copy of the invoice or receipt the software can ‘read’ the data and create the entry needed by the accounts system. While such systems rarely achieve 100% accuracy, the time-savings can be considerable and allow those dealing with finance to concentrate on more strategic work.
The benefits of cloud accounting can be transformative to a business and give you a competitive edge in today’s dynamic market. Embracing this technology is not just a trend but can be considered a strategic move towards a more agile, responsive and prosperous business.
We have experience of various cloud accounting systems. If you would like an assessment of your current system to see how cloud accounting might help you, please do not hesitate to contact us!
Data sharing powers to continue following statutory review
The Digital Economy Act 2017 gave the government data sharing powers that allow it to combat fraud committed against the public sector.
A statutory review, which was published last week, shows that taxpayers have been saved £137 million because of these data sharing powers. The review showed that the Act has enabled more than 100 data sharing pilots across both local authorities and governments or agencies.
The savings were categorised as £99.5 million from identifying Covid-19 loan scheme fraud, £14.9 million from fraud identified in council tax and housing benefit systems, £5.1 million from identifying companies that were fraudulently misstating their accounting and corporate practices to avoid paying tax, and £5 million from council tax debt owed by those in employment.
As a result of the review, Baroness Neville-Rolfe, who is Minister of State for the Cabinet Office, decided to keep the fraud and debt powers contained in the Digital Economy Act. The government subsequently put a report to the UK and Scottish Parliaments and Welsh and Northern Ireland Assemblies summarising the conclusions of the review.
Four of the data sharing pilots have already been converted to standard practice and there are plans for more to join them. Respondents to the consultation expressed that they had no privacy concerns about the powers. See: https://www.gov.uk/government/news/new-data-sharing-powers-save-taxpayers-137-million-since-introduction
The Government plans to introduce new legislation to help parents who earn more money than others with their future pensions. In essence, if you did not claim child benefit because you earned over £50,000 when you had children, you will soon be able to claim National Insurance credits.
These credits are important for getting the full State Pension when you retire.
Why do you need National Insurance credits for your pension?
To get the full State Pension, you need a certain number of years where you have paid National Insurance contributions. These contributions are usually made when you work and pay National Insurance.
However, if you are a parent or carer and you do not work or earn less because you are looking after children, you might not pay National Insurance. This is where National Insurance credits come in.
They act like ‘placeholders’ for the years you are not working due to childcare. These credits count towards your National Insurance record, just like if you were working and paying National Insurance.
But, if you did not claim child benefit because you earn over £50,000, you might have missed out on getting these credits. So, the National Insurance credit scheme allows you to claim the credits you’ve missed, helping you qualify for the full State Pension.
When will you be able to claim?
The Government is saying that it should be from April 2026, and it will cover anyone affected since 2013. However, they have not revealed the full claiming process yet, nor the full eligibility conditions.
Having said that, it is entirely possible that when the claiming process opens, thousands of individuals will be applying so it is best to get your affairs in order sooner rather than later.
We recommend you do two things:
- Check your National Insurance contributions record online here to see if there are any gaps.
- Speak to an experienced accountant who can prepare you for claiming.
Please get in touch if you have any questions about your National Insurance Contributions.
HM Revenue & Customs (HMRC) has made a significant change to the way that some taxpayers access its alternative dispute resolution (ADR) scheme. Where applicants for ADR could previously speak with a call handler, they will now be asked to leave a voicemail on the new 24-hour service.
Available to anyone seeking to settle a dispute via ADR, the voicemail service will require claimants to leave their name and phone number.
A mediator will then contact the claimant within 30 days to discuss their application.
The ADR scheme explained
ADR is a crucial part of navigating tax disputes with HMRC. It is often a useful option for businesses and individuals who seek to meet their tax obligations without overpayment or early or late payment.
You can apply for ADR when you have an ongoing dispute with HMRC, where it has opened an investigation into your tax affairs.
ADR covers a wide range of scenarios but is typically used when:
- Both parties are unable to reach an agreement
- A compliance check is taking place
- There are disputes over the facts of a case
- Communications have broken down
- There may have been a misunderstanding
- HMRC has made a decision you don’t agree with or understand
HMRC will let you know within 30 days of submitting your application if ADR is right for you and how your claim is being progressed.
Will this change impact me?
Many individuals and companies, particularly those with a tax adviser or accountant, will use the existing online form to submit their application. However, if you cannot access this form due to, for example, poor internet connection, you are likely to be affected by this change.
Both ways of applying carry a 30-day time limit, so it is unlikely to disadvantage phone applicants over online applicants. The most significant impact is likely to be the difficulty in speaking to an adviser if you have a question regarding your application.
Additionally, you may struggle with the inability to track a phone application as opposed to an online submission. The best way to avoid the frustrations of a telephone submission is to seek support to submit an online application to the ADR.
We can provide advice and apply on your behalf should you be subject to an HMRC investigation.
Contact us for further guidance on tax disputes with HMRC and the ADR scheme.
Businesses may be able to reclaim significant amounts of National Insurance Contributions (NICs) and plan for future savings because of a recent Tribunal ruling on how car allowances are taxed.
Brought by Wilmott Dixon and Laing O’Rourke in their capacity as employers, the Tribunal upheld the firms’ argument that car allowance payments should qualify for Class 1 National Insurance relief. HM Revenue & Customs (HMRC) subsequently repaid approximately £146,000 to these businesses as a result of the Tribunal.
It has further stated that it will not appeal the decision – an announcement which carries significant implications for other employers that provide a car allowance.
What is the car allowance?
A car allowance is a type of benefit that may be provided to employees in place of a company car.
It is typically a monetary benefit on top of an employee’s salary to allow them to lease or buy a car for work purposes or to maintain the one they own owing to additional, work-related use.
An employer can provide a car allowance to any employee, but most are given to those who spend a lot of time travelling, such as sales staff or managers who oversee more than one site.
It may also be given as an attraction and retention benefit.
Is the car allowance taxed?
Because they are paid as part of an employee’s salary, car allowance payments are normally subject to tax and NICs – for both the employer and employee.
However, work-related travel is also subject to a fuel or mileage allowance.
This is a reimbursement which is not subject to tax if paid at or below the ‘approved amount’ – 45p per mile for the first 10,000 miles and 25p after that.
What decisions have been made?
The Tribunal ruled that a car allowance should be defined as ‘relevant motoring expenditure’ (RME) and can, therefore, be used to offset below-standard mileage reimbursement.
For example, if your company car policy states that employees will be reimbursed at 20p per mile and an employee drives 500 miles, this leaves a difference of 25p per mile – totalling £125.
When you come to pay the car allowance for this person, the first £125 will be taxable as part of the employee’s salary but will not be subject to National Insurance.
This could represent a significant saving for employers that provide a car allowance in place of a company car.
How will this affect me?
If you offer mileage reimbursement and a car allowance to your employees, you could stand to save a substantial amount on your employer NI contributions.
It could also open the door for business owners to reclaim overpaid NICs under this latest clarification.
The Tribunal also accepted that, if your business policies state that a certain number of miles are not reimbursable, then these miles must also be offset against other RMEs.
Benefits all round
The Tribunal’s ruling could make car allowances an attractive benefit to both employers and employees over, for example, a company car.
Tax regulations regarding benefits and NICs can be complex and are likely to change further as these new precedents take effect.
To stay compliant, it is important to remain updated on your tax obligations and work with your accountant to ensure you are paying the correct amount of National Insurance.
For tailored advice on benefits, company cars, travel allowances and tax, please contact us today.
Are you a sole trader or a member of a partnership? Here is what you need to know about the upcoming tax basis period reforms. HM Revenue & Customs (HMRC) is introducing changes to how it assesses and collects business taxes relating to the basis period.
At the end of the 2023/24 financial year, these changes will come into effect – altering the way that sole traders, partnerships and other unincorporated businesses pay tax.
Basis period reform – What you need to know
If you are a business owner or self-employed worker, you will use or have used a traditional basis period.
This is a specific period used to calculate taxable profits for a particular tax year, meaning the basis period is typically the corresponding accounting period to the financial year.
Under current regulations, established businesses and sole traders pay tax on qualifying profits in the 12-month accounting period which ends in that tax year – regardless of whether it corresponds to the financial year.
For example, if your accounting period starts on 1 January and ends on 31 December, the financial year would end the following April. This means that your tax return for this period would be due in January two years afterwards.
Under new regulations, from 2024/25, all unincorporated businesses will be taxed on profits from each financial year – 6 April to 5 April the following year.
This will apply regardless of an individual business’ accounting period.
For the example above where the accounting period ends on 31 December, this change means that the business will have to assign profits from two accounting periods to fit into the 6 April to 5 April timeline.
If the accounts are not completed by the tax return submission deadline, it will be necessary to use estimated profits in their place for the three months to 5 April.
At the end of the 2023/24 financial year, the transitional year for the basis period ends.
Businesses will then be taxed on this longer tax period ending in April 2024 to bring their tax years in line with the financial year.
HMRC has introduced regulations to allow tax liabilities accrued during this period to be paid over a period of five years to reduce the burden of additional tax payments.
Navigating your opening year
The rules are slightly different if this is your first year trading as a business. Instead of paying tax on a full year of earnings, your business will be taxed on qualifying profits earned between the date you began trading and 5 April (the end of that financial year).
This means that you’ll have ‘overlap profits’ for your first one to two years of trading. Your profits earned between the end of the financial year and the end of your accounting period will be counted in two tax returns.
These new rules will also apply to new unincorporated businesses.
Preparing for 5 April
As explained, the new regulations mean that businesses with an accounting period that is different from the financial year will need to divide profits between two different tax payments, where their accounting period doesn’t already align with tax year-end.
This could increase the room for error in your tax calculations, resulting in penalties or a heavy tax burden at a later date.
Aligning your accounting period with the financial year could help you streamline your finances and stay on top of your tax calculations in future.
You can shorten your company’s financial year to achieve this, by a minimum of one day and as many times as you like.
Staying on top of your accounts and financial records can help you stay in good fiscal health and maintain tax compliance.
We can help you to understand your tax obligations and make your accounting period work for you.
Need help understanding the changes to the basis period? Contact us today.
According to consultancy Cornwall Insight, domestic energy prices are predicted to drop in April with analysts predicting that there could be a further fall in the summer. This is good news all round, as energy prices have been a significant factor in the UK’s high inflation rate. A drop in energy prices could lead to a drop in interest rates, and with it a more positive outlook in the economy.
In the wake of a more positive economic outlook, businesses are often presented with opportunities for expansion and growth. But also, because there is a more favourable lending environment, or more eager investor interest, then it can be a more favourable time to exit a business.
Whatever the case, being tuned into the current value of your business can be very useful in shaping the business for growth or for a future sale. Here, we explore the significance of business valuation and provide advice to help you propel your business value to new heights.
Why Business Valuation Matters:
Business valuation serves as a comprehensive assessment of your business’s worth. It goes beyond financial metrics and encompasses various factors that contribute to the overall worth of your business.
Being aware of the value of your business and the factors that influence this can then inform and influence your decisions in crucial areas like attracting investors, negotiating partnerships, developing new products or services, or growing existing ones. Business valuation provides insights into your company’s strengths and areas for improvement, allowing you to chart a course for sustainable growth.
Key Factors in Business Valuation:
While business valuations encompass a wide range of factors, there are 3 key factors you will want to consider.
- Financial Health: Sound financial management is a cornerstone of business valuation. Therefore, invest the time in preparing and reviewing regular financial statements. Just a simple set of monthly management accounts will make a difference. By staying connected with the financials you will more quickly recognise which revenue streams are profitable, you will be more sensitive to the effect of various costs, and more aware of maintaining a healthy balance between assets and liabilities. This knowledge and awareness will translate into more financially acute decisions.
- Market Positioning: Your company’s position in the market significantly impacts its value. Try to stay attuned to industry trends, analyse your competitors, and look for ways to differentiate your business. Being able to clearly identify your unique value proposition will help you create a strong market presence.
- Brand and Intellectual Property: Cultivate and protect your brand and intellectual property. A well-established brand, coupled with proprietary assets, enhances perceived value. Regularly update and safeguard trademarks, patents, and other intellectual property.
Further strategies to Boost Business Value:
Of course, these are not the only areas to look at. Consider how these areas might help you too:
- Diversification: Could you expand your product or service offerings to reach new markets? Diversification not only increases revenue streams but also makes your business more adaptable and resilient.
- Operational Efficiency: Are there ways you could streamline operations for greater efficiency? Perhaps some things are done a certain way for traditional reasons that no longer apply. Or perhaps there is new technology available that could help enhance the way your business runs. A well-run operation not only boosts current profitability but enhances long-term value.
- Talent Development: Could you invest in your team’s skills and knowledge? A skilled and motivated workforce will be more innovative and is likely to work more efficiently, both factors that will positively impact your company’s valuation.
- Strategic Partnerships: Are there any other businesses you are aware of where a strategic partnership with them could align with your business goals? Collaborations can open new avenues for growth, expand your customer base, and enhance your market standing, all things that will positively influence the value of your business.
- Customer Relationships: Can you do more to nurture strong and lasting relationships with your customers? Positive customer experiences not only drive current sales but also contribute to brand loyalty and long-term business value.
A good understanding of business valuation, coupled with strategies for growing it can make your business more valuable and attractive to investors, but also a more focused and enjoyable place to work. Regularly reassess your business’s worth and implement strategies that will increase that worth. Doing so can make your business more valuable and attractive to investors, but also a more enjoyable and focused place to work.
As experienced business advisers, we have tools and resources that can help you with valuing your business. Please just let us know and we would be happy to help!
The National Cyber Security Centre (NCSC) is providing a funded Cyber Essentials programme to help small businesses in certain sectors across the UK implement essential security controls.
While all businesses face cyber threats, some that hold sensitive information or that are seen as an easy target can face increased risks. The focus of the funded programme is to help these additional risk businesses protect themselves.
The Cyber Essentials programme covers how to control firewalls, secure settings, access controls, malware protection, and software updates. These controls can help a business protect itself from the most common types of cyber threat.
The funding will provide 20 hours of free remote support from an NCSC-assured cyber security advisor. The advisor will focus on implementing the controls and ensuring they are effective.
Micro or small businesses (1 – 49 employees) registered in the UK and working on the development of fundamental AI technologies are eligible to apply for the funded Cyber Essentials Programme.
However, businesses that have previously participated in a funded Cyber Essentials programme or that already hold or have recently held (since January 2023) Cyber Essentials Plus certification are not eligible.
For more information on the programme, see: https://www.ncsc.gov.uk/information/funded-cyber-essentials-programme
