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COVID-19 Job Retention Scheme – new rules from 1 July

Coronavirus (COVID-19) Job Retention Scheme – new rules from 1 July

On Friday evening the Chancellor announced three changes to the Job Retention Scheme as well as an extension to the Self-Employed Income Support Scheme (the self-employed can skip ahead to that section).

The changes are outlined here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Detailed guidance on the new rules is expected to be published 12 June.

Job Retention Scheme – new rules starting 1 July

1. From 1 July 2020, the scheme will be made more flexible to enable employers to bring previously furloughed employees back part time and still receive a grant for the time when they are not working.

2. From 1 August 2020, employers will have to start contributing to the wage costs of paying their furloughed staff and this employer contribution will gradually increase in September (govt will fund 70%) and October (govt will fund 60%).

3. The scheme will close to new entrants from 30 June.

Employers: What to do now?

The final date by which an employer can furlough an employee for the first time will be 10 June (in order to complete the minimum 3 week furlough by 30 June).

As some employers have been rotating their furloughed workers then they should consider now if any workers that haven’t yet been furloughed can be furloughed before 10 June in order to leave the door open to the flexible furloughing (part-time) rules starting 1 July.

Extension to the Self-Employed Income Support Scheme (SEISS)

The Chancellor also announced plans to extend the Self-Employment Income Support Scheme (SEISS) for those people whose trade is adversely affected by COVID-19 (coronavirus). Eligible self-employed people will be able to claim a second and final SEISS grant in August; this will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.

If you make a claim for the second grant you will have to confirm your business has been adversely affected on or after 14 July 2020 (PER GOV.UK 12 JUNE UPDATE). People do not need to have claimed the first grant to claim the second.

Self-Employed: What to do now?

Claims for the first SEISS grant, which opened on 13 May, must be made no later than 13 July. Eligible self-employed people must make a claim before that date to receive the first SEISS grant (a taxable grant of 80% of their average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total).

My previous COVID-19 posts can be found here:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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You’ve claimed the SEISS grant – What next?

You’ve claimed the COVID19 Self-Employed Income Support Scheme (SEISS) grant – What next?

Please note this article does not apply to employees or directors of their own limited company, only self-employed Sole-Traders / Partners.

By now most of our self-employed clients have successfully claimed the SEISS grant.  However, if you’re having any trouble making a claim or any doubts about a claim already made please don’t hesitate to get in touch. If you’re still to claim then you might find this 2 minute video helpful.

For those that have already claimed here are some important reminders

  • To claim you’ll have logged in using your Government Gateway User I.D. and password – be sure to keep a permanent note of these login details. They’ll be useful for the lifetime of your self-employment
  • Record keeping and reporting
    You should keep any evidence that your business has been adversely affected by coronavirus such as:
  • business accounts showing a reduction in turnover
  • confirmation of any coronavirus-related business loans you have received
  • dates your business had to close due to lockdown restrictions
  • dates you or your staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities due to school closures
  • You will need to report the grant:

    The grant should be treated as income received on the day it’s paid for any Universal Credit claims or tax credit changes.

Source info: https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme#after-youve-claimed

My previous COVID-19 posts remain relevant and are:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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COVID-19 Self-Employed Income Support Scheme (SEISS): Get ready to claim

Coronavirus (COVID-19) Self-Employed Income Support Scheme (SEISS): Get ready to claim

Since yesterday HMRC have been emailing and texting self-employed taxpayers asking them to get ready to claim the SEISS grant. I will summarise the latest guidance and what you should do now. However the full guidance is not too long and is found here: https://www.gov.uk/https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Please note this article does not apply to employee’s or directors of their own limited company, only self-employed Sole-Traders / Partners.

What is SEISS and what are the conditions to claim?

  • SEISS is a one-off taxable grant of 80% of 3 months average trading profits up to max £7,500
  • You must have been trading since 2018/19 and intend to continue to trade
  • You can continue to work and even start a new self-employment or employed position
  • It will be declarable as taxable income on your 2020/21 Tax Return and for Tax Credit / Universal Credit purposes.
  • You must have been adversely affected by COVID19 due to either:
    1. you’re unable to work because you: are shielding, are self-isolating, are on sick leave because of coronavirus, have caring responsibilities because of coronavirus
    2. you’ve had to scale down or temporarily stop trading because: your supply chain has been interrupted, you have fewer or no customers or clients, your staff are unable to come in to work

When can you make the claim?

  • The go live date is being staggered for individuals you can find yours by using the HMRC tool mentioned below. The first applicants will be invited to claim from 13 May onwards

What can you do now?

  • Your accountant will not be able to claim on your behalf
  • Right now you’re able to use an online HMRC tool to check if you’re eligible
  • The most important thing you can do now is to make sure you’ve a working Personal Tax Account (PTA) (aka Government Gateway). You’ll be using your PTA to login and claim. However, most individuals with accountants either haven’t signed-up to a PTA or rarely use it. Many of my client’s have old login credentials that they might have forgotten. It some cases I have notes of these from when you first signed-up to my service. Therefore, if you’re struggling to sign-in please get in-touch before setting up a new PTA. Login to test your PTA or sign-up to a new one here: https://www.gov.uk/personal-tax-account

My previous COVID-19 posts remain relevant and are:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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COVID-19 Job Retention Scheme: Advice for Company Directors

Coronavirus (COVID-19) Job Retention Scheme – Advice for Company Directors

The critera to qualify for the COVID-19 Job Retention Scheme (essentially funding 80% of salaries), is without doubt, stricter and less generous in the case of small company directors. Below I’ll discuss what can be claimed by this group of employees. The full guidance is the same as that for the non-director employees and is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Job Retention Scheme: How it applies to company directors

  • Directors can be furloughed if they’re an employee on PAYE and on the payroll on 28 February 2020
  • The same restrictions to furloughing apply both to directors and employees. See here for the full list but of particular difficulty for directors is the requirement to perform no work whilst furloughed.
  • In practice, a company may be so badly affected by the crisis that it goes into a ‘COVID-19 hibernation’ meaning that the director would have no day to day employment type duties (especially, income generating activity) but is still on hand to undertake their statutory duties as company director.
  • Other companies might only be partially affected. In such cases, it might be practical to furlough all but one of the directors. This may especially apply to small husband and wife ran companies.

How much is the grant worth to directors?

  • Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). In the case of directors it’s likely that the company will want to continue to pay 100% of the current salary in the knowledge that 80% will be funded by HMRC later.
  • Directors salaries are usually set quite low with the remainder of their remuneration being paid via dividends. Unfortunately HMRC will not be funding anything towards dividends.
  • Presuming therefore that you earn a typical directors salary (often below all tax and NI deductions) of £719 per month. HMRC will fund approx £575 per month.
  • The grant will be received by the company as taxable income and cannot be expected to hit the company before late-June 2020 or later.

Practical tips

  • There’s no need to worry or rush to take action. If work has ground to a halt you will qualify for this scheme. Just apply the rules are best as you can formalise the arrangement later using our template letter to furlough.
  • As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.

My previous COVID-19 posts remain relevant and are:

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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COVID-19 Job Retention Scheme (detailed guidance for employers)

Coronavirus (COVID-19) Job Retention Scheme – detailed guidance now available

Many employers are now considering their need to furlough employees perhaps from the next pay period starting 1 April. Thankfully updated and more detailed guidance on the Job Retention Scheme has now been released.

My summary of the scheme is below and I will personally help each affected client navigate their own particular circumstances. The full guidance is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Job Retention Scheme Summary

  • Grant is available to all employers that had employees on the payroll on 28 February 2020.
  • All employees can be included (full-time, part-time, agency, zero-hours) if they’re being furloughed because of the COVID-19 crisis.
  • Employees cannot work whilst furloughed. Employees put on reduced hours do not qualify.
  • You must have your employees agreement to designate them as furloughed. Of course put this in writing once discussed.
  • The scheme is running from 1 March 2020 for at least 3 months. The minimum period for which you can furlough an employee is 3 weeks.
  • Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). Most employers are best advised to pay the 80%.
  • If 80% of an employee’s salary equates to less than National Minimum Wage (NMW) then that’s fine under the circumstances because the employee is not actually working the hours.
  • A furloughed employee may volunteer to perform work which does not generate income for the business (e.g. bookkeeping, admin type tasks) and can undertake training courses whilst furloughed.
  • Once agreed the payroll runs as normal, with usual tax, NI and pension deductions.
  • An employee who already has two or more jobs can be furloughed by one employer and continue to work for another.
  • If your employee is already sick or self-isolating and in receipt of Statutory Sick Pay (SSP) this must run its course before they can be furloughed.

How do employers calculate the 80%?

Fixed salary employees – simply pay 80% of the fixed salary that was paid for 28 February.

Employees whose pay varies –
For those that have been employed for a full year, take the higher of:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

Fees, commission and bonuses should not be included in the calculation.

For those that have been employed for less than a year – use the average monthly earnings since they started work.

HMRC will also be funding the any Employer National Insurance Contributions and automatic enrolment contributions up to the minimum 3% contribution rate.

Effectively a furloughed employee paid at 80% will cost the employer nothing.

What to do now?

For many employers the best decision will be to furlough all but a skeleton staff. Discuss this with your employees now, decide when to start their period of furlough. Agree with them for how long (a minimum of 3 weeks) but you may like to do one month and reviewed monthly (up to a maximum 3 months unless extended by the government) and at what rate they’ll be paid 80-100%. Finally, and importantly, write to them to confirm. Our letter template can be downloaded Job Retention Scheme – Letter to employees.

As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.

You may well experience a delay between paying your employee and receiving this grant. The claim system is expected to be working by the end of April. Plan you cash flow accordingly and consider using the Business Loan Interruption Scheme (interest free loans – just contact your bank).

What about small company directors?

UPDATE 1 Apr 2020: See my post: COVID-19 Job Retention Scheme – Advice for Company Directors

During the crisis I’ll be blogging about government help for small businesses as soon as the guidance is available. My previous COVID-19 post remain relevant and are:

What financial support is available for UK businesses? – NOW UPDATED
Can the Self-Employed go to work?
Help for the Self-Employed and other FAQ’s
Coronavirus (COVID-19): Help for the Self-Employed – PER THE 26 MARCH ANNOUNCEMENT

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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Coronavirus (COVID-19): Help for the Self-Employed

Coronavirus (COVID-19) Help for the Self-Employed

This evening the Chancellor Rishi Sunak announced the highly anticipated Self-Employed Income Support Scheme (SEISS) .

The government guidance gives a fairly concise summary of how the scheme will work and is found here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

However, I’ll summarise a little further here:

  • SEISS takes the form of a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.
  • Applies to Self-Employed Sole-Traders and partners of Partnerships as long as your tax returns are up to date, you’re currently trading and you intend to keep trading beyond this crisis.
  • Your trading profits must be under £50,000 to qualify for help.
  • To work out your average trading profits HMRC will use the values declared in your Tax Returns 2016/17, 2017/18 and 2018/19.
  • You do not need to contact HMRC to apply. HMRC will contact those eligible for SEISS and ask you to apply online.
  • Remember this grant is taxable income. It will also need to be declared as income if your claim Tax Credits or Universal Credit.

What questions now remain?

Where does this leave directors of small limited companies?

The last line of the SEISS guidance reads: “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.”

UPDATE 1 Apr 2020: See my post: COVID-19 Job Retention Scheme – Advice for Company Directors

Can the Self-Employed continue to work whilst claiming SEISS?

Yes. There is no restriction made due to claiming this grant. That of course is subject following the social distancing guidelines applicable to all as I’ve explained here Can the Self-Employed go to work?

In contrast employees being funded by the Job Retention Scheme are not allowed to work for their employer or take on any other employment during the term that they’re designated furloughed.

For a reminder on how to furlough a worker see here.

During the crisis I’ll be blogging about government help for small businesses as soon as the guidance is available. My previous COVID-19 post remain relevant and are:

What financial support is available for UK businesses?
Can the Self-Employed go to work?
Help for the Self-Employed and other FAQ’s

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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Coronavirus (COVID-19): Help for the Self-Employed and other FAQ's

Coronavirus (COVID-19) FAQ’s: What help is there for the Self-Employed / Small Company Directors? How to forlough employees etc.

Since my two posts Monday 23 March there have been no updates from the government. We are expecting more announcements but for now I hope that this post helps answer some of the most pressing frequently asked questions.

What financial help in there for the Self-Employed?

Regarding sole-traders / partners of a partnership – currently, very little. Extending the 80% funding of earnings to the self-employed has been discussed in Parliament but for now there are no official announcements.

You will likely qualify for the £73 per week Employment Support Allowance via the Universal Credit system.

My opinion: Don’t panic announcements of help for the Self-Employed are expected very shortly. If you’re allowed to work then considering doing so (see below).

Can the self-employed continue to work?

Yes in most cases. There has been a lot of misreporting on this issue along the lines of “non-essential work should stop”. This is not what the Prime Minister announced or what subsequent Government guidance states.

In truth its non-essential travel to work that should stop. The guidance states: “If you cannot work from home then you can still travel to work, provided you are well and neither you nor any of your household are self-isolating.”

True, non-essential shops and public spaces have been closed so in all cases please read carefully the guidance below before deciding if you can still go to work or not.

Government guidance on staying at home: https://www.gov.uk/government/publications/full-guidance-on-staying-at-home-and-away-from-others/full-guidance-on-staying-at-home-and-away-from-others

How to furlough workers and can directors be furloughed?

Any employee that has been out of work since 1 March (i.e. asked to stay home due to the COVID-19 crisis) can be designated as furloughed.

How to do it?

  1. Explain to your employee, first verbally and then in writing, that due to COVID-19 the workload is greatly reduced and you’d like to designate them as furloughed. You must have the employees consent. If they consent then they must stay at home and not take on any new employment.
  2. Agree with your employee the salary they’ll be paid whilst furloughed. Most employers are paying 80% of usual salary (if it varies then based on February’s pay) as this is the amount the government will fund (subject to the £2,500 per month cap). You can however choose to pay 100% but the difference will not be reimbursed by the government.
  3. Employers will makes claims for reimbursement via a HMRC system that is expected to be up-and-running before the end of April.

Can directors be furloughed like other employees?

UPDATE 1 Apr 2020: See my post: COVID-19 Job Retention Scheme – Advice for Company Directors

What about zero hours contract employees?

It seems that these can be furloughed and paid 80% based on their February pay but this guidance is not yet clear.

My opinion: If your business is coming to a standstill then furlough your workers now (even backdate to when they stopped coming to work). Directors don’t panic – I expect help for your earnings will be clarified along with help for the Self-Employed. If you’re struggling to pay the wages of furloughed workers contact your bank for a Business Interruption Loan (these are being processed quickly by most banks) which you can repay once the HMRC funding is processed.

I hope these FAQ’s help for now. I realise that many questions are left unanswered but I’ll aim to provide advice as soon as these issues are clarified.

Please ensure you’re up to date with my previous COVID-19 posts:

What financial support is available for UK businesses?
Can the Self-Employed go to work?

Enjoy saving tax? 

We have two videos to help on our YouTube-logo-full_color channel; and for regular tax-tips follow our blog on  or click +Follow at the bottom of this page.


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Coronavirus (COVID-19): Can the Self-Employed go to work?

Coronavirus (COVID-19) latest: Since the Prime Minister’s announcement this evening of a “UK lockdown” can the self-employed go to work?

The answer is, yes, you probably can. For full guidance and a list of industries which have been shut down (and cannot go to work) see the government guidance here:

https://www.gov.uk/government/publications/full-guidance-on-staying-at-home-and-away-from-others

Updates to follow as they happen.

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Coronavirus (COVID-19): What financial support is available for UK businesses?

Coronavirus (COVID-19): What financial support is available for small UK businesses?

Following is what we know so far. Clients will be updated as soon as possible on specific rules regarding eligibility and how to make claims once that info is available.

Coronavirus Job Retention Scheme

All UK employers will be given support in paying 80% of employees salaries up to £2,500 per month (for at least 3 months from 1 March 2020) for those employees that would otherwise have been laid off during, and only due to, the Coronavirus crisis.

How to claim – HMRC are working urgently to set-up a system but for now we know that you need to designate employees are “furloughed workers”, notify your employees and submit those details to HMRC (method of submission yet to be announced).

VAT payments

VAT payments falling due between 20 March – 30 June 2020 simply do not need to be made on time. This applies to all businesses but it’s deferment only. Any deferred payments will need to be caught-up by 31 March 2021 if not earlier. In the meantime VAT Returns must still be submitted on time. VAT Refunds will be processed as normal.

UPDATED INFO: HMRC ask that businesses please cancel their direct debits with their bank with the intention of setting these back-up again when you cash-flow allows you to make payments.

Self-Assessment payments for the Self-Employed

The usual payment on account due by 31 July 2020 does not need to be paid until 31 January 2021. This deferment will not attract penalties or interest. No application to defer is needed.

UPDATED INFO: Deferral of the July payment on account now applies to all taxpayers under Self-Assessment. There is no need to contact HMRC to arrange this.

HMRC will fund Statutory Sick Pay (SSP) for employees absent due to Coronavirus

Until now employers themselves have funded the £95.85 per week SSP paid to employees during sickness absence. However, starting 13 March 2020 HMRC will fund employers up to two weeks SSP per eligible employee (including directors of small limited companies) who is absent because of COVID-19 (infected, self-isolating etc). During the crisis SSP is payable from day 1 of absence rather than the usual day 4. Eligible employees are those earning at least £120 per week. The HMRC mechanism for repayment is being designed and yet to be announced.

Self-employed not eligible for SSP

The Self-Employed will qualify for Employment Support Allowance of around £73 per week from day 1 of COVID-19 related sickness (extended from the usual day 8). If already claiming Universal Credit then claims are to be made via that system.

Business Rates

Automatic business rates holiday for retail, hospitality and leisure industry for 2020/21. Local Authority will write to confirm – no action needed.

Automatic cash grants for retail, hospitality and leisure industry trading from business properties of up to £25,000 or £10,000 for properties with a rateable value under £15,000 (including those paying no business rates because of Small Business Rate Relief). Local Authorities are writing to affected businesses. No action or application is needed.

UPDATED INFO: The list of businesses to qualify for the grants is expanding. Of note, Estate Agents and Childcare Nurseries recently added.

Coronavirus Bounce Back Loan

The scheme helps small and medium-sized businesses to borrow up to 25% of their turnover, capped at £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Details here.

Insurance

Unfortunately, most businesses are not specifically not insured for closure due to pandemics or government-ordered shut-downs. But, check your policy – if you are then insurers are reportedly dealing fairly with such claims.

Enjoy saving tax?

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Optimum Directors’ Salary and Dividends for 2020/21

What is the optimum directors’ salary and dividend mix for 2020/21?

Small companies will usually pay their directors with a mix of salary and dividends. The level of the directors’ salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for the forthcoming tax year is:

Upper limits (if intention is to fully utilise the basic rate tax band)


2020/21


2019/20

Directors’ salary – per annum

£8,788

£8,632

Dividends – per annum

£41,212

£41,368

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 will be taxed via the directors’ personal income tax return at 7.5%. Meaning that if dividends are paid all the way up to the basic rate band of £50,000 (same as last year) there will be a personal tax bill of £2,663 (last year £2,663)

Companies with more than just a single director on the payroll may benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £4,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £12,500 and dividends up to a maximum of £37,500 (the overall tax saving between the director and the company being around £260).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

Each client of ours will be receiving a personalised recommendation shortly.

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National Minimum Wage rise from April 2020

National Minimum Wages rates

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) will rise from 1 April 2020.

The NLW increase of 51p represents a 6% rise, equivalent to an annual increase of around £930 for a full-time worker.

In summary and effective 1 April 2020 the follow minimum wage rates will apply

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice *
April 2019 £8.21 £7.70 £6.15 £4.35 £3.90
April 2020 (new rates) £8.72 £8.20 £6.45 £4.55 £4.15

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

Plan ahead

Ensure your payroll procedures are up to date and consider notifying staff ahead of time in writing (even via a note on their payslip). This transparency is likely to be well received and could help build positive employee relations. It also offers an opportunity to explain that any overtime worked during a pay reference period prior to the introduction of the new rates, that is payable after these have been introduced, will still be paid at the previous rate.  For further details and more rates visit gov.uk

Pension contribution rates

If you employ staff and run a pension scheme the minimum contributions rates remain the same with no more planned increases:

  • Employer minimum pension contribution 3%, staff contribution 5%.

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Small Business Tax Investigations raise £16 for every £1 spent

HMRC raises £16 for every £1 it spends on staff carrying out investigations into the #tax affairs of individuals and small businesses.

Figures show HMRC collected £4.9bn in extra tax from investigations into individuals and small businesses in 2018-19, but only had to spend £309m on staff to achieve that.

This extra tax included £1.2bn from investigations into underpaid income tax.

Sign up to our #TaxInvestigation scheme to be protected from #HMRC enquiries

Source info: http://bit.ly/smallbusinessinvestigations

Related blog: Can you insure against a tax investigation?


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Selling a rental property? Tax now due within 30 days!

Here’s a few general tax updates for the new tax year starting 6 April 2020.

Selling a rental property in the near future?

If so please keep in mind that if exchange of contracts take place from 6 April 2020 onwards then a standalone online Capital Gains Tax Return must be completed and any tax paid within 30 days of completion. If you’re planning on selling a property – please let us know.

Source info: https://www.gov.uk/government/publications/capital-gains-tax-and-corporation-tax-on-uk-property-gains

Capital Gains on Cryptoassets

HMRC continues to update its policy papers on the tax treatment of crypto assets. The latest versions of their guidance for individuals and for businesses can both be found at https://www.gov.uk/government/publications/tax-on-cryptoassets

Delayed budget

This year’s Budget Day set for 11 March is much later than usual. Unfortunately this may delay some of our usual forward tax planning advice for the coming tax year.

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Beware of the mobile phone tax trap

 

It’s a well-known tax free benefit – an employer may provide one mobile phone per employee for both business and personal use without triggering a taxable Benefit-in-Kind (Section 319 ITEPA 2003).

Sounds simple enough but there are conditions:

• The mobile phone / sim-card must remain the property of the employer
• One phone per employee
• The contract must be between the employer and the mobile phone provider

It’s this final condition that often catches out micro companies that blissfully pay for the director’s mobile phone bill whilst the contract remains in the director’s personal name.

Whilst a seemingly minor technicality the tax treatment of reimbursement of mobile phone costs in this way triggers a costly Benefit-in-Kind Income Tax and National Insurance charge.

It has been reported that HMRC are taking a strict line on this matter, and when discovered, ordering assessments of often 4 years underpaid taxes averaging £500 before penalties and interest.

What’s the solution?

If your mobile contract isn’t in the company name – don’t overly worry – you’re not alone by a long stretch. To keep things practical (and in the real world) we suggest the following:

  • First of all, call your mobile provider to ask about their procedure for transferring the contract to the company (personally I found this surprisingly straight forward)
  • If there are extra charges to make the change during your contract, then wait until you’re out of your contract and try again – this is usually the easiest time to transfer your contract and you’re usually offered the same price as personal rate tariffs

Essentially, in our experience, it’s easier and cheaper than most people realise to review your mobile contracts yourself before HMRC do!

Source info: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21779

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National Minimum Wage & Pensions rise from April 2019

From 1 April 2019 the minimum hourly pay rates along with the minimum contributions for auto-enrolment pensions will increase affecting both employees and employers.

First let’s look at the National Minimum Wages rates:

National Living Wage (NLW) rates (for those over 25 years old) and National Minimum Wage (NMW) rates (for those under 25 years old) will rise from 1 April 2019.

The NLW increase of 38p represents a 4.8% rise, equivalent to an annual increase of about £700 for a full-time worker.

In summary and effective 1 April 2019 the follow minimum wage rates will apply

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice *
April 2018 £7.83 £7.38 £5.90 £4.20 £3.70
April 2019 (new rates) £8.21 £7.70 £6.15 £4.35 £3.90

* The apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The Government has previously said it plans to raise the national living wage to at least £9 per hour by 2020.

Ensure your payroll procedures are up to date. For further details and more rates visit gov.uk

 

Pension contribution rates increase from April 2019

If you employ staff and run a pension scheme the minimum contributions rates are increasing from April 2019. This has long been the intention of The Pension Regulator (TPR) and is the last increase of “phasing”. The increases are as follows:

  • Employer minimum pension contribution 3% (from 2%), staff contribution 5% (from 3%).

If we provide your payroll services then we will of course implement the increased rates on your behalf but because this represents an increased cost for both employer and employee we highly recommend that you let your staff know in advance of this change. To do so you may like to use this TPR letter template.

Source info and more detail: http://www.thepensionsregulator.gov.uk/en/employers/phasing-increase-of-automatic-enrolment-contribution

 

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Optimum Directors’ Salary and Dividends for 2019/20

What is the optimum directors’ salary and dividend mix for 2019/20?

Small companies will usually pay their directors with a mix of salary and dividends. The level of the directors’ salary is usually set in order to avoid any income tax and national insurance. On this basis the recommended remuneration package for the forthcoming tax year is:

 

Upper limits (if intention is to fully utilise the basic rate tax band)


2019/20


2018/19

Directors’ salary – per annum

£8,632

£8,424

Dividends – per annum

£41,368

£37,926

It should be noted that dividends exceeding both the personal allowance and the dividend allowance of £2,000 will be taxed via the directors’ personal income tax return at 7.5%. Meaning that if dividends are paid all the way up to the basic rate band of £50,000 (2018/19 was £46,350) there will be a personal tax bill of £2,952 (last year £2,438)

Companies with more than just a single director on the payroll may benefit from the Employment Allowance which reduces the company’s Class 1 National Insurance contributions (Employer’s N.I.) by up to £3,000.

In such cases there may be an opportunity for directors to eke out a little more tax savings by paying themselves a salary of £12,500 and dividends up to a maximum of £37,500 (the overall tax saving between the director and the company being around £270).

This second option will not be the best fit for everyone. More than ever, personal circumstances must be carefully considered to give the best results.

Each client of ours will be receiving a personalised recommendation shortly.

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Budget 2018 – Small Business Guide & Tax Rates

2017.03 Hammond BudgetHere’s a brief round-up of the main points from the Budget 2018 for you as a small business owner:

Personal tax-free allowance – to increase to £12,500 for 2019/20 (from £11,850)

Marriage Allowance – increase to £1,250 worth a possible tax saving of £250 (from £237)

VAT Threshold – has been frozen at £85,000 for a further two years (until April 2022)

Tax free dividend allowance – to remain at £2,000.

Corporation tax – to remain at the current rate of 19%.

Making Tax Digital – No further announcement meaning that HMRC push ahead with the incoming requirement for VAT registered businesses to maintain digital records from April 2019 – most such business will need to consider using cloud accounting apps.

IR35 – Rules which have seen many public sector contractors become employees are expected to be rolled out to private sector large and medium-sized businesses from April 2020.

National Living Wage – will increase to £8.21 starting April 2019 (from £7.83)

So, at what rate should you set your next year’s director’s salary and dividends? Bespoke advice will be sent to all clients in the coming months. In the meantime we have two downloads available:

Our Guide to the Budget 2018, and our most recent Tax Rates Sheet

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MTD means big changes to your bookkeeping

Are you ready for Making Tax Digital (MTD)?

If you’re a VAT registered business with a turnover above the registration threshold then Making Tax Digital (MTD) is compulsory from April 2019 and will mean big changes to how you do your bookkeeping. Watch this short video.

What is MTD?

From April 2019 businesses will have to provide VAT information to HMRC through MTD compliant software. If you’re already using cloud based software you may need to do little more than make sure it’s ready and working for MTD. If you’re maintaining pen-and-paper records then the MTD initiative is about to force upon you a huge change in your working practices.

HMRC recently issued their VAT Notice 700/22: Making Tax Digital for VAT detailing exactly what is required of the software you choose.

If you are maintaining manual bookkeeping records then please contact us immediately to discuss how we can help you implement MTD compliant bookkeeping.


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Updates to our Privacy Policy

In view of the General Data Protection Regulation (GDPR) coming into effect tomorrow we have updated our Privacy Policy and Cookies Policy.

Our new policies offer more detail on what data we collect, how we use it and your rights. Keeping your personal information safe is very important to us.

You can read the full updated policies here: Privacy Policy, Cookies Policy and Disclaimer

We are in the process of updating our standard terms and conditions and letters of engagement. We will be in touch with each of our clients individually to bring these up to date.


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8 tips to avoid a tax investigation by HMRC

Can you reduce your risk of a tax investigation by HMRC?

I believe that you can – and I’d like to share with you 8 tips on how to do that.

HMRC’s resources are stretched meaning that they’re far more likely to investigate where they have reason for suspicion.

This being the case how can you avoid attracting the attention of HMRC?

1. Appoint an accountant – Errors on Tax Returns are one of the most common reasons HMRC has for taking a look at your file. An accountant will significantly reduce the risk of errors.

2. Review your Tax Returns – Ultimately the book stops with you, not your accountant. When you receive your documents for review make sure you give them the due attention.

3. Submit your Returns nice and early – HMRC makes no secret of the fact that it views you as “risky” if you persistently file late returns.

4. Pay your tax on time – same reason as above

5. Keep business expenses sensible – HMRC compares sector averages – it knows how much you should earn before it even receives your Tax Return. Significant deviations from the norm will raise eyebrows. If you’re unsure if a particular expense is legitimate – ask your accountant.

6. Use the “white space” – Your tax return includes a box “Additional Info” (aka “white space”) – use this if you are declaring something out of the ordinary. It may help avoid questions which can lead to an investigation.

7. Beware of easily overlooked omissions – one-off capital gains, interest on savings or small second incomes can easily be forgotten about when it comes time to prepare your Tax Return. But these are not forgotten by HMRC. Since 2010 it uses it’s Connect software to trawl publicly available databases, e.g. Land Registry (provides details of property ownership and transactions), eBay and Airbnb (might give clues of second incomes), even Facebook and other social media websites have become a treasure trove of information to compare life-style with declared earnings.

8. Avoid avoidance schemes – the scheme promoters will tell you that these are legal avoidance of tax, not illegal evasion. However, aggressive schemes such as Employee Benefit Trusts (EBT’s) or Icebreaker (famously used by Gary Barlow) are constantly being shut down by HMRC. Worst of all the participators of these schemes find that some years later the government enacts retrospective tax laws (as controversial as that is) to recover lost tax since the inception of the scheme.

Three months free tax investigation insurance

If the dreaded happens your best defence is your accountant – for between £6 – £10 per month we can insure you against the professional fees incurred in defending your case. Sign-up within 30 days of this post and we’ll give you three months free cover. To better understand our tax investigation insurance please read our blog post Can you insure against a tax investigation?


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