Archive for the ‘Uncategorized’ Category

A possible, unwelcome increase in service charges

Tuesday, December 11th, 2018

From 1 November 2018, owners of properties on estates or sites that are obliged to pay service charges to a management company – for example, for the maintenance of common areas, gardens, or the employment of a site warden or caretaker – may be in for an unwelcome surprise.

It would seem that HMRC have applied a concession in the past that allowed the management companies to treat service charges collected on behalf of a landlord as part of an exempt supply for VAT purposes – in other words, when the management company charged a resident, no VAT was added to the fee.

From 1 November 2018, if the right circumstances apply, the management company will need to treat the supply of services as a standard rated supply for VAT purposes. As the current rate of VAT is 20%, residents affected may see an equivalent increase in their charges.

However, if the management company for your property is obliged to charge you VAT, it will also be able to claim back VAT on expenses related to your service charge: this is VAT that in the past was a cost to the management company. It is estimated that a more likely service charge increase due to this change in VAT rules will be between 10% to 15%.

Smaller management companies should not be affected by these changes.

As always, unpicking the various “grey” areas of the VAT regulations will likely prove to be a headache for residents and the management companies affected. If you are reading this short article and have concerns, please call for more information.

What is an OpRA?

Thursday, December 6th, 2018

OpRA is the acronym for an optional remuneration arrangement. Before April 2018, these were termed “salary sacrifice” arrangements. Essentially, both are benefits in kind (BiK) offered to employees in place of salary increases.

Recent changes ensure that that where such benefits are offered recipients many are taxed as if the cash value of the benefits provided were taken as salary.

Readers should also note that there are still a small number of BiKs that are tax and NIC efficient.

Accordingly, we feel that there is a need to review all BiK arrangements before the end of each tax year to make sure that the most tax efficient remuneration options are being provided.

Where an arrangement falls under the new rules, the work to be included in an annual OpRA review could be:

  • Test each benefit provided against the OpRA legislation.
  • If OpRA applies, what are the increased tax and NIC costs for the employee and is the employer willing to compensate?
  • Consider alternative benefit arrangements that have a lower tax and NIC footprint.
  • Consider substitution for exempt BiKs, including: pension provisions, cycle to work schemes, ultra-low emission cars, and employer supported childcare.
  • Consider an arrangement to purchase more holiday, effectively unpaid leave.

Our initial report would usually be directed to the employer to agree any changes, and then provide updates for employees to communicate these changes, if any.

Please call if you would like to schedule in a BiK review before the end of the tax year.

Would you set off for uncharted territory without a plan?

Tuesday, December 4th, 2018

Truthfully, no one knows what trading conditions will be like once we exit the EU. Will supply chains seize up or will it be business as usual?

If there is a possibility, however remote, that the commercial landscape will change, doesn’t it make sense to undertake an assessment of any downside risks and plan accordingly?

From a Brexit point of view, supply chain concerns are likely to cause the most disruption, at least initially. Even if your business does not buy or sell goods to the EU, many of your customers and suppliers may, and this could affect your sales and purchases of goods if transport links are affected.

Accordingly, we recommend that you undertake a basic supply chain risk assessment. For example:

  • If you sell goods to EU concerns could you encourage them to increase their stocks of your goods before 29 March 2019?
  • If you buy goods from the EU, could you increase your stocks prior to the same date?

If we head for a no-deal Brexit, and you import goods, what effects will import VAT and other duties have on your margins and cash flow?

And if your suppliers or customers have similar concerns, will you be under pressure to reduce your selling prices to customers or find alternative suppliers in the UK?

Until we are certain which way the no-deal or negotiated separation will pan out, we should be planning for all options. Whilst this may seem to be over-the-top at present, come spring 2019, you will be grateful that you are ready for any disruption whatever shape it may be.

Disqualified from acting as a director

Monday, December 3rd, 2018

When a director has been found guilty of mismanagement verging on fraud, one of the remedies that the courts can impose is disqualification as a director. But what does this actually mean?

A disqualified director has to abide to the following restrictions:

  • While the order or undertaking is in force, it stops a person acting as if they were a director. Accordingly, you cannot avoid the order, or undertaking by simply changing the job description.
  • The order or undertaking also means that you must not get other people to manage a company under your instructions. If you do, those people may also be prosecuted for assisting you in contravening the order or undertaking.

The order or undertaking does not stop you having a job with a company, but unless you have court permission it does stop you:

  • Acting as a director of a company
  • Taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
  • Being a receiver of a company's property.

You also cannot act as an insolvency practitioner.

In addition to companies, you must not do any of the prohibited acts in relation to the following organisations: Limited liability partnerships (LLPs), Building societies, Incorporated friendly societies, NHS foundation trusts, Open-ended investment companies, Registered societies and Charitable incorporated organisations.

A disqualification order will not stop you carrying on a business as a sole trader. You could also trade in a partnership, but not a Limited Liability Partnership (LLP).

Tax free perks at Christmas time

Monday, December 3rd, 2018

This article is our usual reminder of the tax breaks available if you are organising a Christmas party for your staff.

Many businesses take time out to provide their employees with a work based party or similar event. If you are concerned about the tax consequences of Christmas celebrations, read on. We have included in this article ways to organise these events without falling foul of HMRC.

December gives us an excuse to let our hair down and enjoy a well-earned celebration with our work colleagues and partners. The cost of an annual staff party or similar function is allowed as a deduction for tax purposes. However, the cost is only deductible if it relates to employees and their guests, which would include directors in the case of a company, but not sole traders and business partners in the case of an unincorporated organisations. Also, it does not include ex-employees.

If the criteria below are followed there will be no taxable benefit charged to employees:

 

  1. The event must be open to all employees at a specific location.
  2. An annual Christmas party or other annual event offered to staff generally is not taxable on those attending provided that the average cost per head of the functions does not exceed £150 p.a. (inc VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
  3. All costs must be considered, including the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
  4. VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

Merry Christmas…

What is AEO?

Monday, December 3rd, 2018

Businesses that presently trade with the EU block may like to consider applying for Authorised Economic Operator (AEO) status. The following notes explain why this may be helpful.

AEO status is an internationally recognised quality mark that shows:

  • your role in the international supply chain is secure
  • your customs controls and procedures are efficient and meet EU standards

It’s not mandatory, but gives quicker access to some simplified customs procedures and, in some cases, the right to ‘fast-track’ your shipments through some customs and safety and security procedures.

AEO status is for businesses that:

  • are a legal entity
  • are established in the territory of one of the 28 member states of the EU
  • are actively involved in customs operations and international trade
  • have an Economic Operator Registration and Identification (EORI) number

Anyone involved in the international supply chain that carries out customs related activities in the EU can apply for AEO status, regardless of the size of their business.

This includes:

  • manufacturers
  • exporters
  • freight forwarders
  • warehouse keepers
  • customs agents
  • carriers
  • importers
  • others (for example, port operators, secure freight parking operatives and airline loaders)

Types of AEO authorisation and their benefits

You can apply for AEO status customs simplification (AEOC), AEO status security and safety (AEOS), or both.

AEOC status

If you hold AEOC status, you could also benefit from:

  • a faster application process for customs simplifications and authorisations
  • reductions or waivers of comprehensive guarantees
  • completing self-assessment (when implemented)

Whatever the outcome from the current Brexit impasse, AEO status does seem to offer advantages to importers and exporters.

Are you eligible to claim the Marriage Allowance?

Monday, December 3rd, 2018

Marriage Allowance lets you transfer £1,190 of your Personal Allowance to your husband, wife or civil partner – if they earn more than you.

This reduces their tax by up to £238 in the tax year. To benefit from this arrangement, you (as the lower earner) must have an income below your Personal Allowance – this is £11,850 for the current tax year.

You can backdate your claim to include any tax year since 5 April 2015.

If your partner has died since 5 April 2015 you can still claim – phone the Income Tax helpline. If your partner was the lower earner, the person responsible for managing their tax affairs needs to phone.

 

Who can apply?

You can benefit from Marriage Allowance if all the following apply:

  • you’re married or in a civil partnership,
  • you do not pay Income Tax, or your income is below your Personal Allowance (£11,850 for 2018-19),
  • your partner pays Income Tax at the basic rate, which usually means their income is between £11,851 and £46,350.

 

If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £11,850 and £43,430.

It will not affect your application for Marriage Allowance if you or your partner:

  • are currently receiving a pension
  • live abroad – as long as you get a Personal Allowance.

If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.

Tax Diary December 2018/January 2019

Monday, December 3rd, 2018

1 December 2018 – Due date for Corporation Tax due for the year ended 29 February 2018.

19 December 2018 – PAYE and NIC deductions due for month ended 5 December 2018. (If you pay your tax electronically the due date is 22 December 2018)

19 December 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2018.

19 December 2018 – CIS tax deducted for the month ended 5 December 2018 is payable by today.

30 December 2018 – Deadline for filing 2017-18 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2019-20.

1 January 2019 – Due date for Corporation Tax due for the year ended 31 March 2018.

19 January 2019 – PAYE and NIC deductions due for month ended 5 January 2019. (If you pay your tax electronically the due date is 22 January 2019)

19 January 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2019.

19 January 2019 – CIS tax deducted for the month ended 5 January 2019 is payable by today.

31 January 2019 – Last day to file 2017-18 self-assessment tax returns online.

31 January 2019 – Balance of self-assessment tax owing for 2017-18 due to be settled on or before today. Also due is any first payment on account for 2018-19.

Keep private bank accounts private

Thursday, November 29th, 2018

Many small businesses, including landlords, use personal bank accounts to lodge business receipts and make business payments. If traders in this situation are subject to a HMRC enquiry into their business affairs, HMRC would be entitled to request sight of all bank accounts that record business transactions even if those accounts are essentially, personal bank accounts.

As many of the transactions in these accounts are personal, you may need to explain to HMRC where credits to the account came from and provide evidence that the credits are nothing to do with your business.

Without this confirmation or evidence, monies that have nothing to do with your business may be treated as if they are business receipts by HMRC.

Accordingly, if you have let property or a small business, open a separate business bank account and pass all your business transactions through this account. Keep personal bank accounts for personal transactions.

There is nothing worse than trying to remember what the £2,000 credit to your personal/business account was, two or three years after the event, and merely saying that it was a gift from Aunt Mary will not pass muster with the tax office. Inspectors will assume that this is undisclosed business takings or rents.

If you insist on using a personal account for business and personal purposes, then you will need to keep evidence of both personal and business transactions. In our example quoted above this would involve a signed letter from your Aunt confirming the amount and date of the gift made.

HMRC investigators do not have an automatic right to see your personal accounts. In the first instance they will likely be limited to access to business records. Of course, they would like access to your private accounts, as this will evidence more information about lifestyle spending. And so, mixing accounts for business and personal matters will possibly open up investigations unnecessarily.

Keep private accounts private…

Receiving your State Pension if you live abroad

Tuesday, November 27th, 2018

If you are about to move abroad and are already receiving a State Pension in the UK, you might like to read this article setting out some of the issues you will need to consider.

If you live part of the year abroad

You must choose which country you want your pension to be paid in. You cannot be paid in one country for part of the year and another for the rest of the year.

Bank accounts your pension can be paid into

Your State Pension can be paid into:

  • a bank in the country you’re living in
  • a bank or building society in the UK

You can use:

  • an account in your name
  • a joint account
  • someone else’s account – if you have their permission and keep to the terms and conditions of the account

You will need the international bank account number (IBAN) and bank identification code (BIC) numbers if you have an overseas account.

You will be paid in local currency – the amount you get may change due to exchange rates.

When you’ll get paid you can choose to be paid every 4 or 13 weeks and if your State Pension is under £5 per week, you’ll be paid once a year in December.

Delays to payments around US bank holidays

If you live abroad and your payment is due in the same week as a US bank holiday, it could arrive one day late. This is because a US company processes these payments.

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