Blog – Page 2 – The Fishbourne Accountant

Coronavirus – Help For Business – Limited Companies

Posted on 30th March 202031st May 2020 by Monica Jervis

The government have rolled out packages of help for businesses. This is blog is not to repeat the information that the government have provided but to clarify the main points for businesses owners because in a state of anxiety it is easy to miss vital points within a large volume of information.

Here I deal with – The Coronavirus Job Retention Scheme

‘You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages’

The government will fund 80% of employees wages back dated to 1/3/2020 if they are laid off due to Business Interruption due to Coronavirus.

They must have been on your payroll since February 2020.

They must agree with you that they will join the scheme.

They must not work while on the scheme.

If you have reduced your employees pay and/or hours due to coronavirus interruption they will not be eligible for the scheme.

The scheme covers all employees even if they are on zero hours contracts.

The 80% will be calculated on actual salary as of February 2020 for regular salaried employees. Commissions and bonuses are excluded from the calculation.

For variable paid employees the 80% calculation does seem fair and the detail can be found at the link below.

The scheme will be available for application from the end of April 2020.

Sage payroll facilitates applying for the scheme and for those whose payroll software providers don’t support it, the government will provide a portal.

You should seek advice on whether any changes need to be made to employee’s contracts.

Please now carefully read https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#work-out-what-you-can-claim. No responsibility is taken by the author for the interpretation of the information provided and your actions on doing so.

If you’re self employed you can find out more in my blog dedicated to self employed here.

Chichester – Rental properties – Residential or Furnished Holiday Let

Posted on 8th March 202031st May 2020 by Monica Jervis

Despite the added stamp duty on second homes, investment in a second property in and around Chichester is still a popular way of generating extra income

The Chichester Area is renowned for its many places of cultural interest as well as outstanding natural beauty. There are thriving businesses and a university. Therefore, Chichester and its surroundings are a popular place for holiday makers as well as people needing to rent a permanent home.

As our summer weather becomes hotter and with new concerns about holidays abroad, potential Chichester investors may be asking themselves whether they should be looking for a Furnished Holiday Let or a property more suited to a permanent rented residence.

The practical considerations are obvious as a property rented all year round to long term tenants means very little effort for the landlord, especially if they use a Chichester letting agent to collect the rent and organise repairs and the legally required checks. Furnished holiday lets require a lot more management due to the high turnover and the extra requirements of a short term let.

However the tax considerations are more favourable to owners of a Furnished Holiday let business.

Property Rented for permanent occupation

Capital Allowances are not available in respect of furniture and household equipment provided for use in a furnished residential property. Therefore items purchased for the first time in order to prepare the property for letting are not allowable.
However there is a relief which covers the replacement of domestic items which would occur when they wear out after a period of letting.
There may be relief under ITTOIA05/S57 covering pre-letting expenses and advice would need to be sought on an individual basis.
Profits on normal letting activities are not regarded as earnings for pension purposes.
Capital Gains relief such as rollover relief, gift relief and entrepreneur’s relief cannot be applied in respect of the sale or transfer of a normal rental property.

Furnished Holiday Lets (FHL’s)

A property must satisfy certain conditions to qualify as a Furnished Holiday Let.
Profits from a Furnished Holiday Let may be treated as ‘earned income’ and therefore increases the amount the landlord can pay into a pension.
FHL’s do qualify for capital gains reliefs that normal lettings do not such as rollover relief, gift relief and entrepreneur’s relief.
Capital Allowances are available on the furniture, furnishings and equipment in the property. Therefore expenditure incurred in preparing the property for letting can be offset against profits.

I hope this guide will provide some help and inspiration for potential landlords in and around Chichester. For further information or to chat through your concerns please do not hesitate to contact Monica on 07707568549 or monica@thefishbourneaccountant.com

This blog is intended to be a brief guide and is not intended as detailed technical information to be relied upon for an individual situation. Tax rules on property can be complicated and expert advice should be sought for each individual case.

What did the tax man get me for Christmas?

Posted on 19th January 20208th March 2020 by Monica Jervis

We all like a Christmas present no matter how old we are. With Christmas firmly behind us now it’s a good time to look back at the tax we might have saved over the period. If there are any freebies available from the tax man I aim to let you know here…

The question very much depends on who you are.

Businesses/Employees

Social

If you are an employee of a company, your employer can throw you a Christmas party as long as all employees are invited and the company doesn’t spend more than £150 per head on each employee. This is a tax and National Insurance free benefit so if your employer didn’t know about it this year – make sure they know about it next year!

Your employer can also give you a gift known as a trivial benefit. The value must be under £50, it cannot be cash or a cash vouchers, it mustn’t be a reward for work and it mustn’t be a term of your contract.

Gifts

For businesses to know, the company can claim back the Vat and offset the expense against Corporation Tax.

Directors

If you are a director of a company with 5 or fewer shareholders you can receive trivial benefits up to £300 per year.

Christmas gifts from the Government.

Pensioners

If you are drawing a state pension or other relevant benefits you will have received a £10 Christmas bonus which is tax free.

Ways to reduce the tax you pay

Posted on 1st December 20191st December 2019 by Monica Jervis

Why pay more taxes than you need to?

No one likes taxes, especially small business owners. Here at The Fishbourne Accountant we’re committed to helping you reduce your tax spend by making you aware of the areas that you could be saving on. Want to know more? Keep reading…

Take advantage of opportunities

There are lots of tax relief opportunities available for small businesses and individuals. Saving on taxes is all about being aware of the types of tax relief available and understanding which ones can legally be applied to your situation. Although we always recommend consulting with your accountant when it comes to tax reduction opportunities it doesn’t hurt to be informed of where you could be making savings:

Married Couple’s Tax Allowance: allows you to give £1,250 of your personal allowance to your partner providing they earn £12,500 or less, this can reduce tax by up to £250
https://www.gov.uk/apply-tax-free-interest-on-savings: Earn up to £5,000 interest on savings if you are a basic rate tax payer.
Research and development Tax Credits: Providing 230% tax relief on qualifying R&D costs for SME businesses
Enterprise investment Scheme: Provides tax incentives (income tax and capital gains tax reliefs) to those who invest in small unlisted businesses

Accuracy helps avoid unnecessary expenses

Taxes and tax returns are often the bane of a small business owners life. You might even liken them to taking the bins out, letting things pile up until you have no choice but to deal with them. We don’t blame you.

So what does this have to do with saving money on your taxes? Lack of accuracy and a ‘that will do’ approach can lead to overpayment or underpayment of taxes. Underpayment you say? Great! Not so much when you end up in HMRC’s bad books and you’re lumbered with a fine for careless record keeping. If you’re uncertain about (or don’t have time to complete) your VAT return, income tax return or corporation tax return there’s always a solution! Leaving it the hands of a qualified accountant will be more cost effective than dealing with late returns fines and being hounded by HMRC further down the line.

Knowledge is power

Knowing the ins and outs of taxes will not only ensure that you stay on the right side of the law, it will also help you make tax-friendly business decisions more easily:

Understanding expenses: It is important to know what is a valid profit and loss expense, and what is a capital item. By understanding expenses it allows you to make the necessary deductions, you can also weigh up options by which is tax deductible (for example, entertainment is not a valid expense, but you can make tax allowances for up to £150 per employee for a staff christmas party).
Capital Gains Tax: When an asset is sold any profit made will be taxed, with the exception of certain tax-free assets. However, there are common areas where unprohibited deductions are attempted to try and reduce tax spend (such as deducting property repairs from the gain if a property sale). By understanding where deductions can and can’t be made it will help prevent you getting yourself in a legal pickle.
Claiming capital allowances and Vat: Being clever with your purchases and keeping your capital allowances and VAT knowledge in mind will help you make tax saving decisions. A prime example is the decision made on the purchase of a new vehicle ie car versus van. Capital allowance reclaim on vans is quicker than on cars because they are deemed plant and machinery rather than motor vehicles so you get higher tax relief in the year of purchase. Also any private use of a limited company owned car can have significant tax consequences for the individual whereas with a van this is not so drastic. There is no VAT reclaim on cars except in restricted circumstances (50% reclaim on lease cars, allowances for Ltd company pool cars with 100% business use only). Therefore, most limited companies or sole traders are better off opting for a van (providing they suit their needs) as these provide a safer option when it comes to capital allowances and other taxes too.

Your tax saving opportunities are as unique as your business. Although this blog shares some ways to save on your taxes we can’t stress enough the importance of having an accounting professional by your side. We’re here to make sure you’re never paying more than you need to, just give us a call on 01243 532490 or email monica@thefishbourneaccountant.com

Technical Accounting – What goes where?

Posted on 16th September 201916th September 2019 by Monica Jervis

What goes where? Are you allocating monies in the right way? We have a quick look in this blog post regarding technical accounting.

Since MTD many businesses will now have
signed up to on the cloud bookkeeping packages. Those that in the past relied
on only listing their bank transactions may be finding this challenging to
understand.

TIP: Some Examples
of cloud accounting software are Quickbooks and Sage.

It is a common misunderstanding that the
transactions in the bank, actual money transactions, are the driver of the
profit and loss account income and cost balances.

There is a cash accounting scheme that does just
that. But this method can only be used
by non-limited businesses with a turnover of less than £150,000. It should be noted that there can be
disadvantages in using this method.

Accruals Method

Any organisation that wants to monitor it’s sales
and costs accurately will use the ‘accruals’ method. This is where invoices
receipts and other similar documents are used to record either sales, costs of
sales or expenses/overheads. Paid or not, these will relate to the period in
question. The date of the transaction is the date of the document and not
the date of the payment.

Therefore it is simple to answer the question ‘are
you allocating monies in the right way’. Inflows to the bank will be
largely from customers who owe money. Outflows will largely be to pay
suppliers of goods and materials and wages depending on the kind of business.

Example

How do I record the various sales and costs of a
business is what the question is trying to ask. I have indicated earlier this
varies from business type to business type. However, taking a typical VAT
registered distributer of say homewares. The business would receive many
supplier invoices for stock. They would need to record all of their customer
invoices for selling the stock on to outlets to be sold to the public as
well. Customer invoices are recorded as sales and VAT owed.
Supplier invoices are recorded as purchases and VAT reclaimable.
These are the entries for the core transactions of the
business.

Let’s take a business such as the one described
above. They would need to buy equipment and possibly motor vehicles. This is
where an appreciation of the difference between capital items and revenue items
comes in. Motor vehicles last a number of years so only a proportion of
the cost will be charged to the profit and loss account to decrease profit and
this is known as depreciation. The main outlay will be in the Motor
Vehicles account, this will appear on the balance sheet of a company’s
accounts. The Balance Sheet is for displaying the assets and liablities
of a company on a given day. Whereas, the profit and loss account is for
showing the profit of a given period. This is the starting point for
calculating annual tax liablilities.

We hope this helps you start understand the mechanics of your bookkeeping system and will take the next step towards going digital! View our guide ‘Do I need to file a VAT return‘ to learn about Making Tax Digital (MTD).

How to do your own tax returns

Posted on 18th July 20191st December 2019 by Monica Jervis

Start-ups

It’s not now uncommon for people to start a job where they have been told they will be self-employed. In these circumstances the ‘worker’ hasn’t made a decision to start a business but must now take on the administrative and tax responsibilities of someone who has. People in these circumstances are not protected by the minimum wage and therefore may not be in a position to hire an accountant to look after their tax.

It is worth noting at this point that the deadline for registering for self-assessment for the tax year ended 5/4/2019 is 5/10/2019. Use the link https://www.gov.uk/log-in-file-self-assessment-tax-return to sign up. You will receive your personal unique tax reference number (UTR) and will be enrolled for the self-assessment online service at the same time.

It is also worth noting that the tax year runs from the 6th of April to the 5th of April so if you started working self-employed on or after the 6/4/2019 you are in the 2019/20 tax year which ends 5/4/2020.

Base Year

The easiest base year to use is the same as the tax year. Even if that means a short first year.

Tax Overview

Unlike employed people, the self-employed have to keep a provision aside for their Income Tax and National Insurance.

Income Tax is 20% of all profits after the personal allowance which is currently £12,500 in 19/20 tax year.

The self-employed also pay Class 2 National Insurance at £3.00 per week unless profits do not exceed £6,365 per year in which case an exemption will apply. Claiming exemption from National Insurance contributions may have a negative effect on your entitlement to state pension and you still have the option to pay Class 2 voluntarily.

If profits exceed £8,632 (in the 2019/20 tax year) then Class 4 National Insurance also applies at 9% of profits over £8,632.

Please note that thresholds for paying National Insurance and Income tax and National Insurance rates do tend to change in every annual budget.

Record Keeping

There are various ways to keep your records with the cheapest being spreadsheets but the government are pushing businesses to digitise all of their records and use cloud based software such as Quickbooks or Xero which you pay for with a monthly subscription. Quickbooks self employed is a good and cheap start up option in my experience.

Traditional accounting means that the date of your sales and expenses invoices determine the date of sale. This can throw up issues for you, for example you would have to record and pay tax on work you have done even if you haven’t been paid for it by the last day of the tax year.

If your total sales are less than £150,000 in a year then you can use cash accounting. In it’s simplest form this could simply mean downloading your bank statements to a csv file and analysing all of the transactions into sales and expenses. However, you would have to take out any non-business costs including a percentage of or all of any petrol if you are going to use mileage instead.

You can claim simplified expenses for some costs. See https://www.gov.uk/simpler-income-tax-simplified-expenses. This site also includes a checker which shows whether simplified expenses gives a better result that actual expenses.

How to fill out my tax return

Now that you’ve prepared your income and expenses you have all of the information to complete your tax return. The form is available on your personal tax account along with step by step instructions how to complete it.

Make sure you retain a copy of your submission receipt as proof once the tax return has been submitted.

When do I pay my tax

The deadline for paying the tax is 31^st January. So for the 2019/20 tax year, the tax must be paid by 31/01/2021.

If the tax charge comes to over £1,000 you will also be required to make payments on account for the following tax year.

For example if you have to pay £2,000 tax on 31/01/2021 for the 2019/20 tax year you will also have to pay half again for the 2020/21 tax year ie £3,000 in total payable on 31/01/2021.

The second payment on account £1,000 towards the 2020/21 tax year will be made on 31/07/2021.

Assuming your profits for the 2020/21 tax year are £2,000, then come 31/01/2022 you will have paid all of your tax for that year and only have to make your payments on account for 2021/22 ie £1,000 on 31/01/2022 and £1,000 on 31/07/2022.

Tax rebates

If you made a loss in your first year of trading you may be able to offset that against tax paid when you were employed in a previous year.

Don’t forget to enter your bank details on the form in case you get a tax rebate!

For more help …

https://www.gov.uk/self-assessment-tax-returns/get-help

What Now?

Still find taxes a complete and utter nightmare? Have no fear! We’re always here to help you gain the clarity you need to help you feel in control. Just get in touch on monica@thefishbourneaccountant.com or call 01243 931457 or 07707568549. You can also contact using the contact form here.

MTD – Are you ready or are you worried?

Posted on 15th April 20191st December 2019 by Monica Jervis

Recap

Since the 1st April 2019 VAT registered businesses with a taxable turnover over the vat threshold (still £85,000) must submit their VAT returns under the Making Tax Digital (MTD) regime.

In my last blog I explained that businesses must be using software that is capable of ‘communicating with HMRC digitally via our Application Programming Interface (API) platform’. Simply put this means using software which does have the capability or using a spreadsheet with bridging software.

Bridging Software

I am now aware of at least one product that bridges with spreadsheets. See https://vitaltax.uk/ I can’t endorse the product but have been advised on my last tax update course that it is very easy to use including a YouTube demo.

So hopefully anyone reading this blog that is affected has got as far as making sure their software will work.

When do you have to do it?

This affects the first quarter that fully falls into the period beginning 01/04/2019. Therefore your first vat period beginning on or after 01/04/2019 is required to be MTD compliant.

Sign up to MTD

Before you can submit your first MTD compliant vat return you have to sign up to MTD. Business owners can sign up their business at https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat

Exemptions

There are exemptions in limited circumstances where there are religious grounds or other circumstances making MTD compliance impractical.

What about other taxes?

April 2020 is the earliest date that MTD may be applied to other taxes but it won’t be applied until the MTD system for vat has been shown to be working.

Further advice?

Speak to your accountant
Or Contact myself at The Fishbourne Accountant.

GOING DIGITAL – Pros and Cons

Posted on 18th August 20181st December 2019 by Monica Jervis

My last blog focused on the timeframe that most of us have. Here I look into a little more detail at the perceived positives and negatives of the government imposed more efficient accounting systems we are all going to have to sign up to eventually.

Timeframe reminder: Around 2 years for most of us non VAT registered businesses

Positives

• Finally signing up to a computerized record keeping system albeit under protest – you know you always meant to!
• Once you get the hang of it this should mean less processing and more information that is actually in time to be useful as you fully embrace the digital age and all it offers.
• Therefore keeping track of your profits, tax and noticing unusual balances in time to do something about it!

Negatives

• The initial investment of time that ultimately comes with a cost.
• HMRC will be withdrawing their free software and handing over completely to the software houses.
• HMRC deny that this is leading up to bringing tax payments forward, they just want the information in real time. We are yet to see if this will be the case.

Summary

Love it or hate it, this will happen. Hopefully the positives will outweigh the negatives making us happy as well as HMRC!

Remember to get support from your accountant. The data you enter is how HMRC will understand the financial profile of your business. For further support or guidance please contact monica@thefishbourneaccountant.co.uk or call 01243 931457.

GOING DIGITAL

Posted on 4th August 20181st December 2019 by Monica Jervis

Going Digital or making tax digital (MTD) as we now know it. Most people will have heard about this requirement by now and may be wondering if it’s ever going to happen. The answer is that it is still going to happen but later and more slowly than originally planned.

What is it?

Basically using computerized accounting systems including excel, on any device (pc, smartphone, tablet etc) instead of paper records. Eventually reporting tax periodically via the internet to HMRC instead of just once a year.

Is this a good thing?

After some pain it could well be an opportunity as you find you have information about your business far more quickly than you used to so can actually use it to keep track and make supported business decisions. There is a lot of technology out there to be taken advantage of that you may never have otherwise bothered with.

Why are the government doing this?

HMRC say Making Tax Digital is… transforming tax administration so it is:
• More effective
• More efficient
• Easier for taxpayers to get it right

When do we have to do it?

• From April 2018 there is a pilot which is voluntary to join
• From April 2019 VAT only
• From April 2020 Income Tax and Corporation tax

How can I start to prepare?

Set up your ‘Business Tax Account’, consider what software you are going to use and sign up to a free trial which most software houses will offer.

And do remember to get support from your accountant!

Should small businesses be worried about Making Tax Digital (MTD)?

Posted on 22nd July 20181st December 2019 by Monica Jervis

It is only VAT registered business that have to process their VAT Returns digitally by 2019.

Therefore the only change is in the way that this is done and the best advice is to make sure you are using software that will be MTD compliant by April 2019. The main software houses will be up to speed with this because they will have to be.

If you subscribe to QuickBooks for example you should get in touch with their support team and make sure they will be providing the software as part of your subscription.

If you are still using a past version of your provider’s software you may find that you will have to upgrade to their latest version in order to use the MTD compliance facility to submit your vat returns from April 2019.

If you use an accountant to submit your vat returns you shouldn’t have to worry at all as the accountant will look after the technical side.

I do however advise all businesses to register themselves for their Business Tax Account and add all the services they need ie VAT, PAYE, Self Assessment Tax just to give themselves some visibility over their own taxes even if they are using an agent/accountant.

So the answer to the question is no you don’t have to worry, but we are 8 months away from the first installment and you would be well advised to start making sure everything is in place for yourself.