Archive for June, 2016

What is next for Brexit

Thursday, June 30th, 2016

Clients who are concerned by the uncertainty created by the Brexit vote should contact us. There are steps we can all take now that will ease our progress through the transition.

Essentially, we need to be financially fit. The areas of our businesses that we should fine tune are:

  1. Record keeping. There has never been a time when fast access to financial data has been more important. If you don’t use accounting software now may be a good time to research what is available.
  2. Cash flow. Maintaining liquidity, cash in the bank, or spare capacity in your overdraft facility will make it easier for your business to weather the storm. Credit is likely to harden as time progresses. Dust off your credit control procedures and offer a selection of payment options including payment by credit card.
  3. Reconsider investment decisions and focus on those that will enable you to increase sales or reduce costs.
  4. Take a hard look at costs and trim any “gym membership” type expenditure that no longer makes a positive contribution to your business.
  5. Cast around for alternate suppliers that offer a better price deal.

And last but not least, take advice. If you have any concerns about the effects of the vote on your business, please call.

Brexit vote wins the day

Tuesday, June 28th, 2016

In a decision that has staggered the rest of Europe, the UK has voted to leave the EU.

George Osborne emerged today to reassure us all that everything was under control. This, in the face of continuing political hiatus: our prime minister has resigned, almost, and the main opposition party is locked in internal, leadership wranglings.

George Osborne said:

“Today (27 June 2016) I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength. That is because in the last six years the government and the British people have worked hard to rebuild the British economy.

We have worked systematically through a plan that today means Britain has the strongest major advanced economy in the world. Growth has been robust. The employment rate is at a record high. The capital requirements for banks are ten times what they were.

And the budget deficit has been brought down from 11% of national income, and was forecast to be below 3% this year. I said we had to fix the roof so that we were prepared for whatever the future held. Thank goodness we did.

As a result, our economy is about as strong as it could be to confront the challenge our country now faces. That challenge is clear. On Thursday, the people of the United Kingdom voted to leave the European Union. That is not the outcome that I wanted or that I threw everything into campaigning for.

But Parliament agreed that there are issues of such constitutional significance that they cannot solely be left to politicians, and must be determined by the people in a referendum. Now the people have spoken and we, in this democracy, must all accept that result and deliver on their instructions.

I don’t resile from any of the concerns I expressed during the campaign, but I fully accept the result of the referendum and will do everything I can to make it work for Britain. It is inevitable, after Thursday’s vote, that Britain’s economy is going to have to adjust to the new situation we find ourselves in.

In the analysis that the Treasury and other independent organisations produced, three particular challenges were identified – and I want to say how we meet all three.

First, there is the volatility we have seen and are likely to continue to see in financial markets. Those markets may not have been expecting the referendum result – but the Treasury, the Bank of England, and the Financial Conduct Authority have spent the last few months putting in place robust contingency plans for the immediate financial aftermath in the event of this result. We and the PRA have worked systematically with each major financial institution in recent weeks to make sure they were ready to deal with the consequences of a vote to leave.

Swap lines were arranged in advance so the Bank of England is now able to lend in foreign currency if needed. As part of those plans, the Bank and we agreed that there would be an immediate statement on Friday morning from the Governor, Mark Carney. As Mark made clear, the Bank of England stands ready to provide £250 billion of funds, through its normal facilities, to continue to support banks and the smooth functioning of markets.

And we discussed our co-ordinated response with other major economies in calls on Friday with the Finance Ministers and Central Bank Governors of the G7. The Governor and I have been in regular touch with each other over the weekend – and I can say this this morning: we have further well-thought-through contingency plans if they are needed.

In the last 72 hours I have been in contact with fellow European finance ministers, central bank governors, the managing director of the IMF, the US Treasury Secretary and the Speaker of Congress, and the CEOs of some of our major financial institutions so that collectively we keep a close eye on developments.

It will not be plain sailing in the days ahead. But let me be clear. You should not underestimate our resolve. We were prepared for the unexpected. We are equipped for whatever happens. And we are determined that unlike eight years ago, Britain’s financial system will help our country deal with any shocks and dampen them – not contribute to those shocks or make them worse.

The second challenge our analysis identified in advance was the uncertainty that a vote to leave would bring in the coming months and beyond as Britain worked with its European allies to create a new relationship. The Prime Minister has given us time as a country to decide what that relationship should be by delaying the decision to trigger the Article 50 procedure until there is a new Prime Minister in place for the autumn.

Only the UK can trigger Article 50, and in my judgement we should only do that when there is a clear view about what new arrangement we are seeking with our European neighbours.

In the meantime, and during the negotiations that will follow, there will be no change to people’s rights to travel and work, and to the way our goods and services are traded, or to the way our economy and financial system is regulated.

However, it is already evident that as a result of Thursday’s decision, some firms are continuing to pause their decisions to invest, or to hire people. As I said before the referendum, this will have an impact on the economy and the public finances – and there will need to be action to address that.

Given the delay in triggering Article 50 and the Prime Minister’s decision to hand over to a successor, it is sensible that decisions on what that action should consist of should wait for the OBR to assess the economy in the autumn, and for the new Prime Minister to be in place.

But no one should doubt our resolve to maintain the fiscal stability we have delivered for this country. To all companies large and small I would say this: the British economy is fundamentally strong, we are highly competitive and we are open for business.

The third and final challenge I spoke of was that of ensuring that Britain was able to agree a long-term economic relationship with the rest of Europe that provided for the best possible terms of trade in goods and services. Together, my colleagues in the government, the Conservative Party and in Parliament will have to determine what those terms should be – and we’ll have to negotiate with our European friends to agree them. I intend to play an active part in that debate – for I want this great trading nation of ours to put in place the strongest possible economic links with our European neighbours, with our close friends in North America and the Commonwealth, and our important partners like China and India.

I do not want Britain to turn its back on Europe or the rest of the world. We must bring unity of spirit and purpose and condemn hatred and division wherever we see it. Britain is an open and tolerant country and I will fight with everything I have to keep it so.

Today I am completely focussed on the task in hand as Chancellor of the Exchequer to bring stability and reassurance. In conclusion, the British people have given us their instructions. There is much to do to make it work. We start from a position of hard-won strength. And whatever the undoubted challenges, my colleagues and I are determined to do the best for Britain.”

Annual return morphs into a confirmation statement

Thursday, June 23rd, 2016

The following change in Companies House (CH) filing requirements will apply from the end of June 2016. The following post sets out the changes that will apply:

From 30 June 2016, the annual return is being replaced. Instead, you’ll now file a confirmation statement at least once a year. You need to check and confirm the company information CH hold for you and let them know if there are any changes.

To complete the confirmation statement, you will need to:

  • check the information CH hold on your registered office, directors and location of registers – if there’s been any changes, you’ll need to complete a separate form before filing your confirmation statement
  • check and if necessary update your shareholder information, statement of capital and your standard industry classification (SIC code)
  • check and confirm your record is up to date
  • pay the £13 fee to file online or £40 by paper

You can update your record as many times as you need to, but you’ll only be charged once a year. For most companies, this will also be the first time you will notify CH of your people with significant control (PSC). New companies will provide this information on their incorporation documents.

CH will send you an email alert or a reminder letter to your company’s registered office when your confirmation statement is due.

The due date is usually a year after the incorporation of your company or the date you filed your last annual return. You can file your confirmation statement up to 14 days after the due date.

If your made up date is between now and 30 June 2016, you’ll still need to file an annual return. For example, if your made up date is 20 June 2016, you’ll have until 18 July 2016 to file your annual return (due to the annual return’s 28-day grace period).

In or out

Tuesday, June 21st, 2016

This article was posted three days before the UK decides if it wants to stay or leave the EU.

It feels as if everything is on hold pending this result. Government departments are being unusually quiet: no press releases, no announcements, no changes in legislation.

It is a well-quoted cliché, but it really does feel like the calm before the storm.

Whichever way the result goes, will businesses, politics or our daily lives ever feel the same again?

How will we unstitch VAT and other taxation regulations from the grip of EU legislation, if Brexit wins the day? Will life carry on as usual if we vote to stay?

The huge raft of smaller businesses that depend on overseas investment will have fingers crossed that whatever the outcome, the businesses that fill their order books will not up-stick and move to Europe – and the perceived larger market inside the open market – leaving UK subcontractors with gaping holes in their order books.

Will the optimism of the Brexit campaigners bear fruit and will the rest of the world open its doors to UK goods and services; more than making up for any loss in trade to the EU?

Change can be stimulating, but on this scale will we avoid the inevitable fall-out, the slowdown in activity, as political and legal systems and alliances adjust? If our national output does fall, will this mean higher taxation or increased borrowing?

Before we post our next articles, the result will be known and we will start to assess the consequences, whichever way the vote goes.

What will happen to VAT and duties if we vote to leave the EU?

Monday, June 20th, 2016

In? Out? The EU Referendum Vote throws up all kinds of possible scenarios. What would happen, for instance, to VAT and duties if there is majority support to leave the European Union?

At present, the UK Government has not clarified what new trading arrangements would replace the existing free trade agreement with the EU. The EU is, remember, Britain’s largest trading partner.

So if your business manufactures or trades within the EU, what could it potentially mean for you?

Border Controls
If the UK leaves the EU, UK businesses will need to deal with border controls on an ‘as and when’ basis – such as when their supplies cross UK-EU borders. What form might these controls take? It might mean that your business will have to satisfy rules of origin or substantial increases in import duties, for example.

The UK might manage to strike a deal with the EU, similar to what Norway has done. That would make it part of the European Economic Area (EEA). Trade is free between EU and EEA countries. The importer would still need to show proof that the products being imported were made in the EU.

But say the UK could not immediately achieve this situation. That would mean import duties would apply – £10,000-worth of goods imported from an EU could attract £800 import duties and £2,000 as VAT.

Customs Unions
Another possibility is something like the Customs Union agreement between Turkey and the EU. This allows goods to be traded between Turkey and EU countries without import duties, and it includes goods that have previously been imported from other countries as well as those that come from the country of export.

Bear in mind duty-free benefits are limited to goods that originate in the UK or the EU. This applies not only to the products, but the origin of the raw materials used.

Goods would still need to undergo customs clearance when they are exported from the country where they are made and when they enter the UK, which would add to the transport costs. And the importer would need to pay VAT at the point of entry – something which does not happen at the moment.

Legal Process
If the Brexit vote carries, it is likely that businesses in the UK will have time to consider what they need to do and if their business model must change. The UK Government has published a paper – The Process of Withdrawing from the European Union. This outlines the legal process of withdrawing the timescales which would apply. The UK would have up to two years to exit the EU as far as the legalities are concerned so current EU VAT and duty legislation would remain in place.

The UK could extend the transition period after the two years, if the majority of member states approve.

Uncertainty about the result of the EU referendum is already having an impact on businesses and the currency market.

If you have any questions about this subject, please contact Botting & Co Certified Chartered Accountants today on 01903 713508.

HMRC bogus emails extended to phone calls

Thursday, June 16th, 2016

Many of us have received emails purporting to be from HMRC that urge us to provide personal information in order to receive an outstanding tax refund. Sometimes, these “phishing” communications include veiled threats: send information or you will be pursued for large, outstanding tax liabilities.

The perpetrators of the emails want you to respond, the “pot-of-gold” they are seeking is your bank account information or other useful personal details that can be used for nefarious purposes.

Readers should be aware that these email campaigns have now been extended. There are reports that tax payers have been receiving bogus telephone calls, urging taxpayers to provide the same personal information and for the same reasons.

In both cases these emails and phone calls should be ignored. Advise HMRC by email that you have received a suspicious call. You can do this at phishing@hmrc.gsi.gov.uk.

Under no circumstances should you part with any personal data.

If you are concerned by all means call and we will help you send the necessary email to HMRC.

P11D processing errors and late filing

Tuesday, June 14th, 2016

The deadline for filing forms P11D is 6 July 2016. You will be liable to a penalty of £100 per 50 employees for each month or part month your P11D(b) is late. The P11D(b) is the form used to submit your individual P11Ds to HMRC. You’ll also be charged penalties and interest if you’re late paying HMRC the employers’ Class 1A NIC due 19 July 2016 (22 July if you pay electronically).

Listed below are some of the common errors / mistakes made by employers when submitting their forms P11D. If you complete forms incorrectly and then file them, they will be returned to you for correction and re-filing. This may mean that you fail to meet the filing deadline:

  • Duplicated information submitted, for example where P11D information has already been filed online, the employer may submit the same information on paper to ensure ‘HMRC have received it’
  • Using a paper form that relates to the wrong tax year
  • Not ticking the ‘director’ box if the employee is a director
  • Not including some form of description or abbreviation, where amounts are included in sections A, B, L, M or N of the form
  • Leaving the ‘cash equivalent’ box empty where a figure has been entered in the corresponding ‘cost to you’ box
  • Sending forms P11D when they have also ticked the box in Part 5 of form P35 (in the Employer Annual Return) to indicate that forms P11D are not due
  • Where a benefit has been provided for mixed business and private use, some employers only enter the value of the private-use portion but full gross value of the benefit must be reported
  • Not completing the fuel benefit where this applies
  • Completing the ‘from’ and ‘to’ dates incorrectly in the ‘Dates car was available’ boxes by showing the whole tax year. For example, entering 06/04/2011 to 05/04/2012 to indicate the car was available throughout that year. But if the car had been available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed

The following examples are a guide to, but not an exhaustive list, of circumstances, which might amount to a reasonable excuse for late filing:

  • The employer is a sole trader, or director of a ‘one man’ company, and has suffered a sudden and serious illness between the end of the tax year and the filing date, or has been affected by a prolonged and serious illness throughout the period
  • Unavoidable and unexpected absence close to the filing date because of business commitments or domestic emergencies
  • Accidental destruction of the records through fire or flood
  • Exceptional postal delays because of a strike by postal workers
  • Although the employers form P11D(b) has not been received by HMRC, the employer claims nevertheless to have posted it in good time
    • Unless there is evidence to the contrary, such a claim should be accepted on the first occasion that it is made, provided that a further form P11D(b) is then submitted promptly. In any subsequent year the employer should be required to substantiate such a claim by evidence of posting of some kind
  • Sudden disruption to a business or its records by a break in
  • Installation of a new computer system or program for the payroll which has hit unexpected teething problems
  • Although the employer’s form P11D(b) is a photocopy, it is a photocopy of an official P11D(b) form which bears a ‘wet signature’ (a signature in ink)

Please contact us if you have any problems completing the P11D forms or dealing with the filing requirements.

Do you have under-declared property income

Thursday, June 9th, 2016

HMRC have a long running campaign to encourage property owners who receive rental income from property, and who have not declared this income on their tax return, to get their tax affairs in order. The following example, reproduced from HMRC’s website, shows how this can occur.

Beena age 23

 

• Moved to Leeds to work in finance sector and purchased a 2 bedroomed flat to live in when she got there.

• She started a relationship and after 18 months moved in with her partner.

• Rather than sell her flat, which she saw as a good investment, she decided to rent it out. The rental income just covered the mortgage payments.

• She makes no SA returns and her only dealing with HMRC is through the payroll of the company that employs her.

• Beena’s total mortgage payments are circa £8000 per annum and the rent she receives is £8,400. She also has agent fees and maintenance costs to pay.

• Beena has not realised that only the interest payments on her mortgage are an allowable expense for tax purposes. The £3000 she paid last year to reduce the capital owed cannot be claimed. Therefore, she should have told HMRC about her rental income and paid tax on around £2,500 profit (allowing for other expenses related to maintenance, etc).

• If the profit was below £2,500 HMRC could collect the tax due on this through amending Beena’s PAYE code number without the need to complete a tax return.

 

If you own property that you let out and have not considered the tax consequences, please call to discuss your options. Making a voluntary disclosure to HMRC may save you money as HMRC will likely reduce any penalties payable.

Cycle to work

Friday, June 3rd, 2016

The following notes set out the general scope of the Cycle to work scheme. This provides a number of tax advantages that employers can use to encourage employees to cycle to work.

Who can use the scheme?

Employers of all sizes across the public, private and voluntary sectors can implement a tax exempt loan scheme for their employees. To maximize the benefit of implementation, it is desirable that participation in a scheme should be as broad as possible. To qualify for the tax exemption, the cycles and cyclists’ safety equipment loaned by the employer under the scheme must be available to employees generally with no groups of employees excluded. Further information on general availability can be found in the Employment Income Manual on the HM Revenue and Customs website at EIM21664, EIM21665 and EIM 21666: http://www.hmrc.gov.uk/manuals/eimanual/updates/eimupdate070510.htm

The test of available to employees generally can have implications for employers with staff who are under 18 years of age or on or near the National Minimum Wage.

What equipment is included under the tax exemption?

Eligible equipment includes cycles and cyclists’ safety equipment. The tax exemption defines a “cycle” as ‘a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle’ (192(1) of the Road Traffic Act 1988 (c.52)). An electrically assisted pedal cycle can be included under the scheme.

Cyclists’ safety equipment is not similarly defined in the legislation and a common sense approach should be taken to the equipment provided. This could include:

  • Cycle helmets which conform to European standard EN 1078
  • Bells and bulb horns
  • Lights, including dynamo packs
  • Mirrors and mudguards to ensure riders visibility is not impaired
  • Cycle clips and dress guards
  • Panniers, luggage carriers and straps to allow luggage to be safely carried
  • Child safety seats
  • Locks and chains to ensure cycle can be safely secured
  • Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs
  • Reflective clothing along with white front reflectors and spoke reflectors

It is the employer’s choice what safety equipment is offered, but you may wish to confirm with your local tax inspector whether the equipment you provide falls within the tax exemption.

If you would like to set up a scheme for your employees, or lobby your employer, we can provide guidance. There are different rules for self-employed businesses.

HMRC ticked off by National Audit Office

Thursday, June 2nd, 2016

The National Audit Office (NAO) has published a report criticising HM Revenue and Customs (HMRC) for periods of poor customer service last year.

Responding to the report, Ruth Owen, HMRC’s Director General for Customer Services said:

We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.

Over the past six months we’ve consistently answered calls in an average of six minutes, and have launched new online tax accounts and webchat for everyone, enabling customers to manage their tax affairs wherever and whenever they want.

There’s never been a better or more convenient service for our customers.

HMRC achieved improvements to customer service by:

  • recruiting more than 3,000 additional advisers who can work outside normal office hours when many customers choose to call HMRC
  • introducing more flexible working to deal with large fluctuations in customer demand throughout the year, underpinned by a new telephone system that enables HMRC to move calls around the country in response to demand
  • launching online services that enable customers to manage their tax affairs when and where they want, including by smartphone, with online support such as webchats. The new personal tax account already has more than 1.5 million users and the business tax account more than five million registered users

The proof of the pudding… Readers that have experienced bad service from HMRC should register their complaint. It remains to be seen that service has now “fully recovered”.

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