This year many of our clients are likely to experience higher tax bills, due to the changes in Dividend Tax and increased profits on their property rentals.  Others might find themselves affected by the High-Income Child Benefit rules.

No Shocks or Horrors

To avoid any nasty surprises, we are aiming to get all tax returns completed and filed in the coming weeks.

Therefore, please gather together your self-assessment information and email, post or hand deliver your records to the a4c team in Newdigate by 31st October.

Non-Scary

We appreciate that knowing where to start can be daunting and we have many templates we can email to help, but this guide gives a brief overview of the information we need from you.

Self-Employed or Partnership

We need the details of your trading income and business-related expenditure, between April 2017 and March 2018.

For example:

  • A list of sales invoices, or evidence of money received from customers
  • Bank statements showing money in, money out and closing bank balance
  • Details of expenditure, such as:
    • Tools & materials
    • Workwear
    • Professional memberships
    • Training courses undertaken
    • Fuel or mileage
    • Telephone / internet costs
    • Stationery & postage
    • Advertising and marketing
    • Anything else that is a legitimate expense in order to deliver your products or services.

Creep it Real

Remember that any costs you deduct from your turnover to reduce your profits (and therefore bring down your tax bill) must be real and supported by evidence.  You should always keep supplier invoices / receipts and bank transaction records as evidence in case HMRC ask to see these in the event of a business records check.

Employed

If you had PAYE employment we need your P60 for 2017/18.  If you received taxable benefits then we also need your P11d.

Pension

Income from a pension is treated in the same way as PAYE employment and you should have been sent a P60 from each pension you receive.  In most cases you will have already paid tax on the funds but you may owe additional tax, depending on your other sources of income.

Property or Land

If you own a property or land which is rented out then you need to declare the rental profits.  These are calculated by taking a list of the income (rents received) and deducting expenditure (management fees, services charges, rates, repairs etc).

You can also claim finance costs, for example in relation to interest paid on a mortgage but this year the relief is limited to 75%, meaning that your property profits will be higher than in previous years.

Remember if you jointly own property or land then you only have to declare your share of the profits, therefore we need to know your ownership split.

Savings & Investment Dividends

You need to declare interest received on savings and any dividend payments received on shares that you own.  Your bank or the company you own shares in should have provided certificates.

Foreign Earnings

A few clients have interests overseas, so be sure to declare this, albeit there are double tax treaties with most countries, meaning that if the income has had tax paid on it in the originating country then you are not likely to be taxed in the UK also.

Capital Gains

If you disposed of an asset during the year then you need to calculate how much of a gain or loss was made.  For example, if you sold a second property, jewellery, art works etc and made a profit this needs to be declared with possible Capital Gains Tax due.

Treats for Subbies…

There are many subcontractors working in construction who haven’t yet filed their tax returns but are likely to be due a Tax Rebate.  HMRC are turning these around in approximately 4 weeks so submit your paperwork asap to receive a bonus before Christmas!

Avoid Skeletons in Later Years

It’s easy to forget to include some things on your tax return, but our experience is that they always come back to haunt you in the future.

Make sure you declare ALL your sources of income.

Savings accounts earn interest (not always a great deal) and tax is no longer deducted at source so this need to be included on your tax return.

Remember to tell us if you, or your partner, receives Child Benefit payments, as you might need to pay some back if earnings in your household exceed the allowable limit.

If you’ve made charitable donations these can help extend your Basic Rate band, thus saving you tax, so don’t forget these!

No Fear

As always the team at a4c are on hand to give support and answer any questions you have so get in touch today.

HMRC lost another interesting case this week involving football referees and their employment status.

An assessment of over £500k in unpaid tax and national insurance had been raised against a company called the Professional Game Match Officials Ltd (PGMOL), on the basis that HMRC considered some of their football referees to be employed, rather than self-employed.

Team PGMOL

PGMOL provides referees and match officials to competitions such as the Premier League, FA Cup and the English Football League (Championship, League 1 and League 2).  The company has three members, the FA, the FA Premier League and the English Football League.

Many of the referees are employed by PGMOL under full-time contracts and are paid via PAYE, these are referred to as ‘Select Group’ referees.  They have defined roles within the business and are deemed to be under the supervision, direction and control of their employer.

Team HMRC

The case with HMRC relates to a ‘National Group’ of self-employed individuals who referee in their spare time, often alongside other full-time employments.  These refs officiate matches in the EFL and FA Cup.  They are paid a modest fee by PGMOL and expenses by the home club and not via the FA.  HMRC argues they should be deemed as employees.

The Employment Status Test

From other blogs we’ve written, you might be familiar with the things HMRC look for when deciding if an individual is genuinely self-employed:

  • Is there the right of substitution?
  • Do they provide their own tools and equipment?
  • Can they decide what work to undertake, how and when to do it?
  • Do they have multiple clients?
  • If a mistake is made do they need to rectify it in their own time, at their own expense?

 

Often a contract between the client and the self-employed worker stipulates many of the above clauses, but HMRC then look to see if the working practices correctly reflect the terms.

So, Were The Refs Offside?

There is no right of substitution.

The National Group referees are provided kit to wear on the pitch and suits to wear to and from games showing the PGMOL logo.  However, they are expected to provide their own football boots, watches, cards and whistles.  They also have their own computers and pay for gym membership and Sky Sports TV Subscriptions personally.  Although PGMOL does offer a heart screening programme and psychological support.

The referees have no obligation to accept match appointments and although they can’t pick which matches to work at, they can give a geographical preference.  They are expected to have a satisfactory level of fitness and to obey the football match rules and regulations, laid out by the FA.

The referees only have one paymaster.  They are not required to raise invoices, but when they submit their post-match report, payment is automatically released.

All referees, whether employed directly or self-employed, have a clause in their contract relating to immediate dismissal if caught accepting bribes.  They must also log all gifts or hospitality received for more than £50, with anything over £100 needing prior approval.

If a referee does not show up for a match they are not paid.  They can also be cancelled at short notice.

HMRC’s Attack

HMRC argued that the self-employed referees had an obligation to attend matches.

HMRC argued that PMGOL had sufficient control over them.

HMRC argued that the referees only worked for one primary paymaster and were not able to select their hours.

HMRC were adamant that the referees were not in business on their own account.

Time for VAR

The first tier tribunal disagreed with HMRC.  Whilst there were pointers towards employment status there were sufficient exceptions in relation to mutuality of obligation and control for the ruling to confirm that the refs were self-employed and therefore the tax and NIC were not due.

Refs Win on Penalties

It was an interesting case and shows how the rules on employment status are not always clear.

Our advice to businesses and self-employed workers is to check your contracts and ensure that your working practices truly reflect a distinction between the client and the worker.

Key things to keep in mind are Supervision, Direction and Control, if the power in these areas is with the Client then an employment status challenge by HMRC could result in a home defeat!

Receipt Bank is a paperless bookkeeping platform which allows you to capture supplier invoices and expense receipts digitally and then pass these seamlessly into Xero for direct integration with your accounts.

When you receive a supplier invoice or receipt, simply snap a photo of the document, using the mobile app on your smart phone.  Or for supplier invoices that you receive by email and for any digital invoices (Uber, Amazon, etc.), simply forward these to your dedicated Receipt Bank email address.

Receipt Bank will extract the data from the document and feed this magically into Xero.

Your data is stored securely in the cloud so once the submission is completed, you can throw that receipt away! Less paper and less hassle for you.

Receipt Bank is being offered as a bolt-on to your a4c accountancy services, so for less than the cost of a Costa Coffee you can embrace this exciting new technology.

Get in touch today to find out more.

An exotic dancer has been allowed to claim the cost of certain clothes, hairdressing and make-up against her profits!

HMRC recently challenged a self-employed exotic dancer who performed at Stringfellows nightclub in central London. Their accusation was that she had claimed for clothing and make-up which they did not consider to be allowable expenses.

With help, the dancer fought the challenge and was successful.

A similar challenge was raised a few years back against a barrister who lost her cases for claiming dark suits and white blouses as business expenses.

So what differentiates these two cases?

The barrister was adamant that the clothes purchased were ‘wholly and exclusively’ for the purpose of her profession and that she would never have worn such clothes privately.  However, it was deemed that because the clothes had a second purpose, namely that of providing warmth and decency, that there was a duality of purpose, the clothes could have been worn privately and were therefore not deemed allowable.

On the other hand, in the case of the exotic dancer it was deemed that the clothes she purchased were deemed inappropriate to be worn outside of the nightclub.  As they could not be described as providing warmth and decency the costs were allowed to be deducted from her profits.

Lessons learned

What can we take from this?  If you purchase clothes in relation to your business, which cannot be worn away from the job they are likely to be allowable.  If it could be argued that there’s any duality of purpose then it’s a no-no.

Apparently while no-one cares if you look like an off-duty barrister on the bus, the courts draw the line at looking like an off-duty exotic dancer!

Sitting at a desk all week can play havoc with your fitness levels.

This is why Esther & Natasha look for different and interesting challenges to train for.  There have been a few running events (inlucing the London Marathon) and many mud & obstacle challenges along the way but on Saturday 4th August we attempted THE challenge that almost broke us!

Here’s our write up of the day:

Saturday 4th August 2018

Today was the inaugural TSFE Fan Dance Hunted event and Natasha and Esther bravely volunteered ourselves as wolf bait.

The Fan Dance is a route well-known within military circles as part of the selection process for the Special Forces.  It’s a 24km route across the Brecon Beacons, which encompasses a climb to the top of the Pen Y Fan mountain, the highest peak in South Wales.

The Fan Dance Hunted event follows the traditional Fan Dance route but competitors are given an arm band and a fifteen-minute head start before a pack of wolves (super fit military personnel in yellow) are released with the sole purpose of catching entrants and reclaiming the arm band.  Add to this the anxiety of a halfway cut-off time, where those failing to meet this are removed from the hills, and you’ve got yourself an adrenalin pumping event like no other…

The usual pre-race nerves kicked in as we arrived for the 7.30am registration, not helped by a delayed start .

We each weighed our back packs (14lbs for Esther & Natasha) and checked our mandatory kit – 3 litres of fluids, food, spare clothes, waterproofs, first aid kit, emergency blanket, torch, compass, map, phone & watch. The briefing took place and we shuffled to the start…

  

Standby, Standby, GO!

The first mile, from a standing start, is UP.  A very steep, relentless, exposed path takes you to the top of Corn Du.  We both later admitted having serious doubts about our ability to complete the challenge, due to the toughness of this first mile.   Esther was caught by her wolf before reaching the summit, although to be fair almost everyone in her category got caught by him, he was fast and very hungry!  (His finishing time was confirmed as under 2.5 hours – we stood no chance!)

As we approached the top of Pen Y Fan clouds descended and visibility was pretty poor.

We stumbled our way across the peak heading for the TSFE flag and Directing Staff.

 

Peering over the edge we realise the route continues via a very steep descent that literally involves jumping off boulders to rocky ground below, known as Jacobs Ladder.  Gradually the boulders turn into rocks and then become uneven steps and so we hobble down as quickly as is possible without breaking ankles in the process.

Towards the bottom of Jacobs Ladder the weather clears and we have an uninterrupted view of the route ahead.  At this point we’ve completed just over 2 miles in one hour and have another five miles to go until the halfway point.

The cut off time is 2hrs 45mins and we’re having doubts once again.

We set off along the Roman Road trotting where possible but mostly fast walking as we negotiate unstable stones, ditches and gravel.  Now the miles start flying and we’re soon through the next few checkpoints and heading into the forest for the final charge to halfway.

 

We make the cut off at just over two hours – don’t know what we were worried about!

A quick bite to eat and drink and we’re off to do the whole course again in reverse.

This direction feels easier, probably because we know what’s to come.  We pass a few casualties with cramp and crippling blisters and offer our words of encouragement and a dextrosol tablet or two.

We’re chatting as we trot which means before we know it we’re half way up Jacob’s Ladder.

Chatting noticeably slows as we gasp for breath and struggle to cope with the burning muscles.  Before we know it we’re at the top and ready to embrace the final mile down to the finish.

Sadly, it wasn’t an enjoyable down as by this point we’ve got aching hips, sore knees and bruised toes and the steep decline does nothing to help these ailments.

Still we both finish smiling in around five hours.  Amazingly Natasha also still has her armband as her category’s wolf was having a shocking day with cramps and therefore she completed the course evading capture!

A quick photo, medal collection, presentation of Natasha’s prize and its back onto the M4 for our journey home.

All the way home we agree never again but we said that about the London Marathon and both re-entered the ballot this year!

Until next time?

Overall this was an amazing and well organised event by TSFE and we extend our sincere thanks to Jason Bowen, his admin team and of course the wolves!

All entry fees were donated to the charity Scotty’s Little Soilders, which is a charity with royal approval that helps children of military personnel killed in action.

We also extend our thanks to the AllGirlsUK group that supported our training with organised hikes around Box Hill and endless words of encouragement.

Watch this space for our next adventure…

HMRC has published the Making Tax Digital (MTD) rules. What do you need to know?

The rules

These were published in the VAT Notice 700/22.

Which business do the rules apply to?

From 1 April 2019, all business with a taxable turnover that exceeds the VAT registration threshold (currently £85,000) are required to store their VAT records digitally and submit VAT returns via an interface with HMRC software.

If the turnover subsequently falls below the threshold the business will still be required to comply with the rules unless you deregister. The rules apply from the first VAT period starting on or after 1 April 2019.

Only businesses with taxable turnover that has never exceeded the VAT registration threshold will be exempt from Making Tax Digital in 2019. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold.

Which records need to be recorded digitally?

  • the business name
  • the address of the principal place of business
  • the VAT registration number
  • any VAT accounting schemes that the business uses

 

For each supply the business makes you must record the:

  • time of supply (tax point)
  • value of the supply (net value excluding VAT)
  • rate of VAT charged

 

For each supply the business receives you must record the:

  • time of supply (tax point)
  • value of the supply
  • amount of input tax that will be claimed

 

How will the VAT return be submitted?

From April 2019 submissions must be made using MTD compliant software.

Digital record keeping

All VAT registered businesses must keep and preserve certain records and accounts. Under MTD records must be kept digitally within functional compatible software.

Paperless businesses?

Sadly not, there are some records that by law must be kept and preserved in their original form either for VAT purposes or other tax purposes. With this in mind you will need a software solution with well organised supporting paper records.

Soft landing

HMRC has announced that there will be a soft landing of MTD, allowing a period of time for businesses to adjust.

Software options

At a4c we are Xero Silver Partners and as an approved MTD software option we will continue to promote this to our clients.

More information

You can read the full VAT Notice here: VAT 700/22

If you are a VAT registered business and don’t have MTD compliant software in place then now is the time to take action.

Speak to a member of the a4c team for more information on how Xero could help you to comply, whilst affording lots of other worthwhile benefits too!

 

 


Is this tax scheme too good to be true?

Without hearing the details of the scheme, you know as well as we do that the answer is ‘Probably’!

Nobody likes paying tax, and of course you never want to pay a penny more than you have to. However there are hundreds of creative tax schemes out there looking to entice you on the promise of a minimised tax bill.

How can you protect yourself?

If you don’t have a detailed understanding of tax law it’s difficult to know whether the scheme you’re considering is compliant.

At A4C we are often asked for our advice on various schemes and have therefore created a list of the mechanisms used by many avoidance schemes, which we hope will help you identify the things you should be wary of:

  • The arrangements in place sound a little too artificial
  • It all seems very complex and overcomplicated
  • There appears to be no risk, yet you are promised guaranteed returns
  • There are secrecy or confidentiality agreements
  • The scheme claims to have the backing of a top accountancy firm or lawyer
  • The scheme is said to be approved by HMRC
  • Offshore companies or trusts are involved
  • There are exit arrangements in place to avoid tax consequences
  • The scheme requires you to take out insurance against its failure to deliver the tax benefits.

Basically, if any tax scheme sounds too good to be true, the chances are, it probably is!

If you’d like a free and friendly chat about the way you have your business finances arranged then reply to this email or call Esther or Natasha at A4C today on:

01737 652 852

Contact Us:


A4C Group
Accounting4contractors Ltd,
Surrey’s fastest growing

cloud accounting practice
Phone: 01737 652 852
Email: info@a4cgroup.co.uk



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I’m a sole trader and business is going well, is it worth me becoming a limited company?

This is a question we get asked all the time and in most instances incorporating a limited company is a tax efficient option.

£25,000

A sole trader with profits of £25,000 in 2018/19 will only save approximately £700 in Tax and NI by incorporating – assuming they are extracting all of the profits in the most efficient way possible. However the additional cost of compliance, company accounts etc. would probably wipe out the saving at this level.

£50,000

Once profits get to the £50,000 mark, the tax savings are more significant at approximately £2,000, making incorporation more attractive. The savings continue to increase at profits above this level, but not indefinitely.

£70,000

At profits of £70,000, the tax saving is £2,380 but above this, the savings contract.

£145,000

Where the profits are in excess of £145,000 it is now actually more tax efficient to be a sole trader!  But remember that saving tax isn’t the only reason to incorporate a limited company…

Considerations

Incorporating a company has other benefits including the protection of assets owned personally, the ability to contribute into a pension scheme & relevant life cover as well as the option to split income with others.

The downside is that you have more compliance responsibility and it becomes vitally important to maintain good accounting records (with our help of course).

Free Consultation

It is important to remember that there’s no longer one size fits all so what’s right for someone else may not be right for you.

Call today and book a free meeting with one of our lovely team to discuss whether this is a beneficial option for you.

01737 652 852

2018/19

January may be long behind us but it is never too late to revisit those resolutions.  With the new tax year on the horizon why not use this milestone to get your business affairs on track for a healthier future?

  • Give up bad habits; plan salary payments in advance for tax efficient withdrawals (see our guide for more info)
  • Speed up your accounts; perform tasks on the go from your smart phone, ipad or laptop
  • Slim down your paperwork; switch to an accountancy package that does everything in one place
  • Find time to relax; through collaboration with your accountant meeting deadlines in good time
  • Save money; by avoiding penalties and switching to a fixed fee accounting solution

Xero

There are many accountancy software packages available to help streamline your day-to-day business activities.  As an example, at a4c clients are given access to Xero online software, which can be used anywhere and on any device with Internet access.  Clients need no training and can generate invoices, record expenses, set up automated bank statement feeds and lots more in a few simple steps, safe in the knowledge that a team of professionals waits in the background to carry out the accountancy tasks for you at month end.

Plain English Pledge

At a4c we know that “accounting” speak is not everyone’s cup of tea and that understanding the rules of business can be a daunting prospect, especially when new legislation frequently comes into force.  With this in mind we provide an accountancy service that gives unlimited support and that answers all questions honestly and accurately, no matter how large or small.

Other elements of our service include:

  • Payroll, CIS, VAT, statutory accounts, corporation tax returns, self assessment returns, confirmation statements and all the bits in between!
  • Delivery of quarterly management reports, providing key performance indicators
  • Xero accounting software
  • Unlimited and informal telephone / email support without the usual accounting stuffiness
  • Relieving clients from the stress and confusion that comes with being the director of a limited company.

Say Hello today!

If your resolution is to put your business on track for a healthier 2018/19 tax year then pick up the phone for a no obligation informal chat today and we can say hello to collaboration (and the new you!).