Archive for February, 2019

HMRC’s drive towards digitisation

Thursday, February 28th, 2019

Digitisation is simply the conversion of text, pictures, numbers and sound into a form that can be processed by a computer.

Add to this the replacement of feet on the ground with algorithms and programs that respond to certain criteria and we can start to see where the management of our tax system is drifting.

To aid this process, taxpayers (business owners and property landlords) will eventually – if Making Tax Digital (MTD) is expanded beyond the filing of VAT returns – be required to upload their financial data on a regular basis and this data will be used to generate firstly, computations and estimates of tax and NIC due, and secondly, demands for payment. Apart from the technicians required to keep the IT running, no human hands – apart from yours – will touch a key-board.

Much of the present printed output that HMRC sends in their trademark brown envelopes are computer generated documents: statements of tax due, tax code notices and reminders to pay tax.

There are still help lines, and they are answered by HMRC’s staff, but in order to answer your questions they will dial up the data on a computer screen. The days of paper files and monumental filing systems are long gone.

VAT registered traders with turnover above £85,000 will experience first-hand the effects of this march towards digitisation as they start to file their VAT returns using HMRC’s MTD, linked software requirements for return periods starting on or after 1 April 2019. A similar process is promised for the upload of accounts information – for income and corporation tax purposes – but not before April 2020.

At some undefinable future date all the data required to compute your tax liability and deal with payment thereof, will be digitised. It will be pushed from third parties (your employer, your bank, and your business accounts software) by direct links to your tax account with HMRC.

Let us hope that HMRC are securing our data and observing the requirements of data management required by the General Data Protection Regulations. If the future is digital, one can only imagine the chaos that would result in the event of a catastrophic data loss by HMRC. We suggest that readers of this article take a hard look at their in-house data security arrangements. If HMRC did ever lose their data, it would be handy to have secure back-ups of your own systems to fall back on.

What is TSP?

Tuesday, February 26th, 2019

HMRC have issued a letter to VAT registered traders that either export or import goods to and from the EU. They are introducing new Transitional Simplified Procedures (TSPs) for customs purposes.

For importers the text says:

HMRC is introducing new Transitional Simplified Procedures (TSP) for customs, to make importing easier for the initial period after the UK leaves the EU, should there be no deal. Once you’re registered, you’ll be able to transport your goods into the UK without having to make a full customs declaration at the border, and you will be able to postpone paying your import duties. However, for controlled goods you will have to provide some information before import:

For further guidance, including which ports TSP applies to, please go to www.gov.uk/hmrc/eu-simple-importing.

They also underlined how to make customs declarations in the event of a no-deal Brexit. They are:

You will be responsible for making customs declarations for your UK-EU trade in a no deal scenario. Many businesses find the simplest way to make customs declarations is to appoint a customs agent to manage the process for them.

So that you are ready you should now:

  • register for your Economic Operator Registration and Identification (EORI) number if you haven’t done so already at www.gov.uk/hmrc/get-eori.

Then:

  • if you want to make declarations through a customs agent, appoint one as soon as possible. If you cannot appoint an agent, or do not think this is the right solution for your business and if you intend to import or export regularly, you should now
  • make sure someone in your business is trained to make customs declarations
  • buy specialist software that links to HMRC’s customs systems
  • if you’re exporting, register for the National Export System at www.gov.uk/guidance/export-declarations-andthe-national-export-system-export-procedures .

For further information, go to www.gov.uk/hmrc/trade-with-the-eu .

As the political process grinds to a, as yet, unresolved conclusion, we recommend that importers and exporters to the EU take a close look at the links embedded in this article and act as appropriate.

How lean is your business?

Thursday, February 21st, 2019

There are obvious benefits to your personal wellbeing if you sweat it out at the gym three times a week: improved stamina, enviable muscle tone, endorphin buzz and unwanted pounds shed. But could your business benefit from a similar process?

We are not suggesting that business owners and their staff leap to their feet and jog on the spot, beneficial as that may be, but there are ways that you can approach business fitness that have enduring and continuing benefits. For example:

• Could you speed up the collection of cash – the time you allow customers to pay your bills? For many business owners the focus is on selling, and important as this is, converting a sale into cash in your bank account – rather than allowing your customers to keep your money in their bank account – is no less important.

• Do you have redundant assets or stock that you could sell at a discount? This might free up storage space for more productive uses and add to your cash reserves.

• Do you have surplus floor space? Are there opportunities to sub-let these spaces and create new income streams?

• Do you really need new cars/commercial vehicles? With a little tender care from your local service centre could use of your vehicles be extended for a few years? This would free up investment capital for more productive uses.

• Are you ready for life after Brexit? Have you examined your supply chains? Do you understand and are ready to implement changes to import/export processes?

It is important to stress that this is not just another reminder to get ready for Brexit, important as this may be. Working on your business fitness has no downsides. Taking time out to consider cash flow, utilisation and management of assets, organisation of capital and funding, has no downsides. It will be time well spent and will have enduring benefits.

In the same way that a personal fitness program will help to keep you well and active, so too will a structured approach to business fitness keep your business in good shape. Call now if you would like to discuss your options for undertaking a fitness assessment, it’s never too late to start…

Parliament eases through Finance Act 2019

Tuesday, February 19th, 2019

According to a recent government announcement, 32 million people will be better off as the Finance Bill 2018-19 receives Royal Assent.

Treasury pundits who wrote the announcement said:

A basic rate taxpayer will payat least £1,200 less income tax than they did in 2010, thanks to the government’s changes, giving people more help with the cost of living.

As well as cutting taxes for millions of people a year earlier than planned, fuel duty has been frozen for a ninth year in a row, and beer, cider and spirits duty have also all been frozen.

The Act means first-time buyers will be eligible for relief from stamp duty on shared-ownership homes, to help them realise their dream of owning their own homes.

And businesses will benefit from a new capital allowance for qualifying non-residential structures and buildings and an increase to the Annual Investment Allowance to £1 million for two years – helping to maintain our economic success by increasing investment and productivity.

Finally, the government’s commitment to a fair and sustainable tax system is further realised in this Finance Bill, through making individuals or entities that reduce their tax bill by holding intangible property in low-tax jurisdictions liable to pay the tax they owe in the UK, making non-residents liable for capital gains tax on the sale of all immovable UK property, and introducing rules to prevent firms fragmenting profits between unrelated entities to avoid tax.

It is interesting that there is no mention of the likely outcome of the Brexit negotiations on our business community, and how this might affect these 32 million taxpayers.

Fingers crossed that all will be well, and the present uncertainties will be resolved before the end of March.

Goodbye 2017-18 and hello to 2018-19

Thursday, February 14th, 2019

The deadline for filing 2017-18 self-assessment tax returns without paying a penalty for late submission has passed (31 January 2019).

But a new and pressing deadline now presents itself: 5 April 2019.

As we have outlined in previous posts, most tax planning needs to be considered and actioned before the end of the tax year to be effective. For example, have you considered the following?

Tax planning options for 2018-19

Income tax:

  • If your income is approaching £100,000 have you considered the loss of all or part of your personal tax allowance?
  • If you receive child benefits, and the income of either parent is set to exceed £50,000 you will have to repay all, or part of the benefits received and file a self-assessment tax return.
  • Have you maximised payment of pension contributions?
  • Have you considered the tax advantages of making charitable donations?
  • If you have unused personal allowance, and your spouse (civil partner) is a basic rate taxpayer, have you considered transferring part of the unused tax relief?

Capital gains tax:

  • Have you fully utilised your tax free exempt amount for 2018-19, £11,700?
  • Could you transfer assets that you are about to sell into joint ownership with your spouse and divide the gains between you?
  • If you have purchased a second home during 2018-19, have you considered your private residence relief options?

Inheritance tax:

  • Have you utilised the various annual, tax-free gifts exemptions for 2018-19?
  • If your personal circumstances have changed during 2018-19 (marriage, divorce, bereavement) have you changed your Will and/or considered the IHT consequences?
  • Have you made any significant gifts in excess of tax-free limits? What are the IHT consequences?

Holiday let property owners

  • Have you checked your occupancy numbers for 2018-19? Will you still qualify for the various Furnished Holiday Lets tax advantages?

The above list is the tip of the tax planning iceberg. Every tax payer’s circumstances are unique and require individual attention and consideration.

 

If we have not yet had an opportunity to discuss your tax planning options for 2018-19 please call; once the 5 April 2019 deadline passes so too do the majority of your options to reduce your tax liability for 2018-19.

What was all the fuss about?

Tuesday, February 12th, 2019

Last year, the 23 May 2018 to be precise, the UK adapted the General Data Protection Regulations (GDPR). The deadline created a rush of publicity and activity as businesses across the UK pored over their data processing systems, making changes to accommodate the new rules.

After the deadline, its as if the curtain came down on GDPR and we moved on to consider other pressing issues, Brexit for example.

ICO has not been idle

But the Information Commissioners Office (ICO) have not been idle. The ICO have created an “Action we’ve taken” page on their website. Using their new powers, the ICO have been quick to up their audits and investigations since May 2018. Political motivated organisations, regional police groups and other data processors have come in for closer scrutiny and where necessary fines and winding up notices have been issued.

For example, an organisation received a penalty of £200,000 and an Enforcement Notice for breaching ICO regulations by sending out nearly fifteen million unlawful SMS marketing messages to subscribers.

By the end of last year, the ICO had 79 cases under investigation, and on 17 December 2018, new powers were adopted through amendments to the Privacy and Electronic Communications Regulations 2003. The ICO says:

The new law allows the ICO to serve monetary penalties, of up to £500,000, on directors and senior officers of companies held responsible for making nuisance calls or sending nuisance messages or emails.

The new data protection regulations are here to stay

GDPR, and its enforcement by the ICO, is here to stay. In the coming months we will probably see an increasing number of cases bought by the ICO as their initial enquiries turn into litigation and the issue of penalty notices. Readers should also be advised that the GDPR has now been absorbed into UK law by the Data Protection Act 2018 (DPA). Even if we leave the EU and abandon its legislation the DPA will still apply. Data regulation and enforcement, it would seem, is here to stay.

Happy days

Thursday, February 7th, 2019

In what amounts to a single-issue mini-budget the Treasury posted a welcome announcement for the manufacturers and consumers of alcoholic products last week. They said:

The Chancellor announces that alcohol duties are frozen

From today, (1 February 2019) taxes on beer, cider and spirits are frozen for another year, keeping costs down for industry and consumers alike.

  • alcohol duty cuts and freezes over the last six years have provided £4.4 billion of support to pubs and drinks industry,
  • a typical pint of beer is 14 pence cheaper than if taxes had risen in line with inflation.

Beer lovers, brewers, and landlords alike can raise a toast today as Dry January comes to an end and alcohol duties are frozen for another year.

The Chancellor, Philip Hammond, during a visit to an independent brewery in Liverpool, praised the contributions made by the British beer and drinks industry to the economy and communities, including local pubs.

Previously announced in the 2018 Budget, the freeze will keep costs down for beer, cider and spirits, and builds on the numerous cuts and freezes to duty by the government since 2013. The move has saved the public an average of 14 pence on every pint of beer, 4 pence on a pint of cider and £1.50 on a bottle of Scotch whisky.

As well as the duty freeze, the Treasury also announced at Budget that it will be looking at the Small Brewers Relief to make sure the scheme continues to support the country’s smallest beer makers, helping them to grow and expand into new markets. A survey asking small brewers for their views on the relief was launched this week.

In addition to pubs, the duty freeze on cider will support the economies of British rural communities and help fuel investment and innovation in whisky and gin producers.

Cynics may infer that any increase in alcohol production is designed to help us cope with other government interventions in the coming months? They are probably right.

Happy days…

How to cope with recession

Tuesday, February 5th, 2019

Recession literally means “the act of going back, of receding…”

Economic pundits have hijacked the word to mean “a period of temporary economic decline during which trade and industrial activity are reduced…”. It is usually heralded by a fall in Gross Domestic Product (GDP).

According to many commentators on the state of the UK economy we are about to revisit recession.

The cause this time around is not the failure of the banking system, but our imminent withdrawal from the EU. Most informed sources on either side of the remain-leave debate are resolved that our exit from the EU will slow-down economic activity in the UK in at least the short term, and there is a possibility that we will experience a “temporary period of economic decline”.

If so, how do we cope with recession?

On a personal level, we generally cope best with physical stress if we are fit and healthy. Our suggestion for weathering economic stress is roughly the same: we need to get financially fit. For example, we would suggest that businesses large and small should be considering:

  • Selling any assets that are no longer used in your business – convert redundant assets into cash and free up space.
  • If you have spare floor space, what are the opportunities for sub-letting? Convert unproductive real estate into an income stream.
  • How much credit do you allow customers? Could you reduce your average days credit allowed and shift your money from your customers’ bank accounts into yours?
  • Do you have a three to five year business plan? Has it been tweaked to reflect the effects of a Brexit slowdown?
  • Have you undertaken a risk assessment of the impact of disruptions to your supply lines?

This is by no means a comprehensive list of to-dos. Every business will likely experience their own unique challenges in the weeks ahead, what is clear is that we should be getting match fit to face these challenges.

And as we have said before, this getting-prepared activity will not be wasted whatever the politicians finally decide is the best course for our EU exit. There are no downsides to being financially fit, it will always allow you to hit the ground running.

  1. we haven’t spoken to you about the challenges that your business may be facing in the coming months, call now so we can start to create your business fitness training program. If recession becomes a reality, we would suggest running at the front of the pack is the best place to be.

Tax Diary February/March 2019

Monday, February 4th, 2019

1 February 2019 – Due date for Corporation Tax payable for the year ended 30 April 2018.

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

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

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

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

2 March 2019 – Self assessment tax for 2017/18 paid after this date will incur a 5% surcharge.

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

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

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

What can you give away before the end of the tax year?

Monday, February 4th, 2019

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

  • wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
  • normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
  • payments to help with another person’s living costs, such as an elderly relative or a child under 18
  • gifts to charities and political parties

You can use more than one of these exemptions on the same person – for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

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