Massey Accounting Company

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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:

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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)



Directors’ salary – per annum



Dividends – per annum



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.

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

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

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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?

Enjoy saving tax?

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

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Making Tax Digital – When will it affect you?

Are you ready to throw away those paper invoices and do your bookkeeping using only online software? Do you need to prepare for such a change?

If your turnover is above the £85,000 VAT threshold then yes, you have just 12 months to prepare. Smaller businesses are expected to go digital sometime after 2020.

MTD – in the making
March 2015 Chancellor Osborne announces “the end of the Tax Return” with the introduction of Making Tax Digital (MTD). The idea being that all self-employed people and businesses will be required to keep digital records (paper seemingly being outlawed) and the usual Tax Return will be replaced with 4 quarterly statements + a year-end statement submitted electronically to HMRC.

Over the following months accounting bodies and business groups identify a mountain of hurdles before this grand idea could possibly be implemented.

Summer 2016 and Brexit happened – which seems to have dramatically slowed down the implementation of MTD. The idea lives on but it’s very much a shadow of its former self.

MTD – where are we now?
The most recent government update was 13th July 2017 in which the following implementation timetable was outlined:
• only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
• they will only need to do so from 2019
• businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

What does MTD mean for you?
• Smaller businesses trading under the VAT threshold can breathe easy for now. At the earliest digital records and quarterly reports will be required from April 2020 (I suspect later).

• Businesses with a turnover above the VAT threshold should use 2018 to review which cloud software would best suit their needs. Now, this is where things become a little uncertain as the government are still to define exactly what will be required to comply with MTD for VAT. It is so far thought that such businesses will no longer be allowed to keep their records on spreadsheets and then manually transfer the figures into HMRC’s online VAT submission tool. HMRC’s aim is that VAT Returns are submitted directly from the software on which your records are kept. Whilst we still await precise guidance this year is probably a good time to consider using cloud accounting software from the start of your next financial year. Unfortunately, such software isn’t free but it does offer excellent reporting facilities and automation of processes (inc. bank feeds). We, like many of our clients, already use cloud accounting and wouldn’t look back.

The two most popular offerings being Xero and QuickBooks (Xero being our preferred choice).

Clients of ours that are most likely to be affected will be contacted by email shortly.

For now, even if you’re not immediately affected, it’s worth knowing that HMRC are pushing ahead with MTD – although, sensibly, at a much slower pace than originally announced.

Source info:

Enjoy saving tax?

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