Making Tax Digital for VAT

If your accountant hasn’t mentioned this yet, then you really ought to have a new accountant. Does this affect me? Are you VAT registered? Then if so, yes. This does affect you and you need to be considering whether you will be compliant in time. What is it? Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software. It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application. The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via our Application Programming Interface (API) platform. If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received. Not all software is compliant, contact us to find out if your current software will be compliant and whether you need to take any additional step. When does this start? With effect from 1 April 2019, if your taxable turnover is above the VAT registration threshold you must follow the rules set out in this notice. If your taxable turnover subsequently falls below the threshold you will need to continue to follow the Making Tax Digital rules, unless you deregister from VAT or meet other exemption criteria (see paragraph 2.2 of this notice). Only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold. The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return. Here are some examples. Example 1 – Existing business with taxable turnover above the VAT registration threshold on 1 April 2019 A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019. Example 2 – Business with a taxable turnover above the Making Tax Digital threshold at the point they need to register for VAT A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT Returns they are subsequently required to make as their taxable turnover was above the VAT threshold when they...

read more

Changes to the VAT Flat Rate Scheme

From 1 April 2017 the VAT Flat Rate Scheme will be changing for some small businesses. Currently the flat rates percentages range from 4% to 14.5% depending on the type of business. The new percentage is 16.5% and applies to businesses with low expenditure relative to their sales. The test is if the VAT inclusive expenditure is either less than 2% of the VAT inclusive turnover or less than £250 per quarter then the new rate applies. Certain types of expenditure are excluded: Vehicles and other capital items. Food and drink purchased by the owners / employees. Unless the business is providing transport services such as couriers and taxis then the value of fuel and parts are also excluded. If you think your business may be affected by the changes to the Flat Rate Scheme, then it is worth checking using the criteria above and then comparing your VAT liability to the standard basis. For many small businesses it is worth considering leaving the vat flat rate scheme and returning to standard accounting. As always, we’re here to help. Get in touch if you’d like some help or...

read more

2016 Budget Summary

On 16 March 2016 George Osbourne presented his budget, the budget was followed by the publication of the finance bill on the 24 March. Here are the top key points affecting small business. Personal Allowance For 2017/18 the personal allowance will increase to £11,500 (2016/17: £11,000). The basic rate band will increase to £33,500 (2016/17: £32,000), resulting in a higher rate threshold of £45,000 for 2016/17. We have been told that the higher rate threshold will increase to £50,000 by the end of this parliament. New Lifetime ISA From April 2017 those under the age of 40 will be able to subscribe to a ‘Lifetime ISA’. Subscribers can pay in up to £4,000 a year until the age of 50 and receive a government bonus of 25%. Contributions to a Lifetime ISA will count towards the ISA contribution limit which will be set at £20,000 for 2017/18. Funds can be withdrawn without charge when the subscriber reaches 60 or purchases their first residential property worth £450,000 or less. The ISA will be ‘flexible’ and funds can be withdrawn at any time before the age of 60, subject to the subscriber losing their bonus (including any interest or growth thereon) and paying a 5% charge. More details should be released in Autumn 2016. Class 2 National Class 2 NICs will be abolished from April 2018. 4 NICs will be reformed so that the self-employed will continue to build entitlement to contributory benefits following the abolition of Class 2. We would expect an increase in the Class4 NIC rate, although this has not been announced yet. Micro-businesses allowances Two new allowances of £1,000 each were announced by the Chancellor, to be introduced from April 2017. The allowances are available for property and trading income and are aimed particularly at micro-entrepreneurs carrying out activities such as selling goods or letting their homes through online marketplaces. Individuals with trading or property income below £1,000 will no longer be required to declare or pay tax on that income. Whilst detailed information on these two new allowances is not available at the time of writing, we do know that they will work in a similar way to rent a room relief: if income from property or trading exceeds £1,000 the taxpayer will have a choice between deducting actual expenses from income or deducting the £1,000 allowance from income. Corporation Tax Rates The planned reduction in the rate of corporation tax to 19% on 1 April 2017 will go ahead as planned. 1 April 2020 the rate will drop to 17%. Loans to participators This will affect any client with an over-drawn director’s loan account. The rate of s455 tax will increase from 25% to 32.5% from April 2016. The new rate will apply to loans made or benefits conferred by close companies on or after 6 April 2016. Planned reduction in CGT rates One of the headlines from the 2016 Budget was the reduction of Capital Gains Tax rates from April 2016. The basic rate will reduce to 10% (from 18%) and the higher rate will reduce to 20% (from 28%). An 8% surcharge rate will apply to gains on residential property and carried interest, effectively keeping the rates exactly as they were. ATED related gains will also be chargeable at 28%. Trustees and personal representatives will...

read more

Auto Enrolment

We’re posting a series of short blogs regarding auto enrolment, if you are an employer and you have staff this WILL apply to you. Too many employers are still burying their heads in the sand, the start date for the largest employer was 2012 and the smallest employers are caught in 2017. Read on and if your affected please get in touch and we’ll help keep you on the right side of the Pensions Regulator.   What is Auto Enrolment? Automatic Enrolment is being staged in over a period of six years, which started with the largest employers in 2012. Automatic enrolment means that, rather than having to choose which pension scheme to join, members of staff are put into one by their employer as procedure. If any staff member decides not to be in the pension scheme, they must opt out. You must write to all your staff to tell them how being auto-enrolled will affect them and allow other staff to join if they request to do so. The new scheme has been introduced to promote people to stay in pension saving, this is because statistically, people are living for much longer yet too many people aren’t saving enough – if anything at all, for what is presumably going to be a long retirement. The law on workplace pensions has been made easier for millions of people to save up for their pension, particularly those on lower incomes. All UK employers have to enrol their staff automatically into a workplace pension if they meet certain criteria and make contributions. If you are an employer in the UK, you must start enrolling staff into a pension scheme from your staging date, though there is an option to postpone the enrolment for three months. Does it apply to me? Are you an employer in the UK, with staff working for you? – If so, then yes, automatic enrolment applies to you and there are things you’ll need to do. We’ll be covering these in our next...

read more

Clydesdale bank to relocate to Leeds in the event of a Yes in the Scottish Independence Referendum

Clydesdale Bank who own Yorkshire Bank and who are part of the National Australia Bank Group have announced that they will re-register as an English company if the Scotland is to separate from the rest of the UK following the forthcoming independence vote. This is to provide further certainty to it’s customer during any independence negotiations. While, this is sure to be disappointing for Alex Salmond’s independence campaign, Leeds and Yorkshire will be very pleased to welcome another prestigious financial institution to our part of the world. The announcement follows news that Lloyds, Bank of Scotland, RBS, Standard Life & Scottish Widows also are making plans to move to England. Further information can be found here. In addition, Leeds based Pearson Jones Plc, have announced that all new investments in Scottish-based financial services providers maybe temporarily suspended if they do not deliver rapidly on plans to re-locate to the UK in the event of a vote for independence. For further information regarding the Pearson Jones press release, see here....

read more

HMRC Tax Return Filing Deadline – A Possible Extension

Have you ever tried to file your tax return online using the HMRC website? If you have you will know that there can be a delay between registering and receiving your activation code allowing you file the return. HMRC have decided to extend the tax return filing deadline to the 15th February provided the tax payers meets the following criteria: The deadline extension applies to taxpayers who did the following between midnight on 21 January and midnight on 31 January 2014:  Enrolled for the Self Assessment online service, or  Requested a replacement user ID or password However, the deadline extension only applies to those who were already registered for Self Assessment and have a unique taxpayer reference (UTR). Therefore, this does not help those who are late in notifying their liability to charge. Since the extension only applies where the free HMRC software is used to file the 2012/13 Tax Return, partnerships and trustees cannot benefit as their is no facility to file these Returns using this software. It is also worth remembering that the extension only applies where the usual filing deadline for the 2012/13 Tax Return would be 31 January 2014. Therefore, if the Tax Return was issued after 31 October 2013, the taxpayer has three months from the date of issue to file the Return and make the payment. You should also note that the payment deadline remains the same (31 January 2014). You can find more information about this on the Tolley’s Website....

read more