Blog

Christmas party

As hard as it is to believe, but provide your staff with social events and the tax man wants his cut.  Social events are declared on the employers P11d as a benefit resulting in a tax charge and you have to pay class 1a NIC on the total cost.

However, HMRC do have a bit of festive cheer and there are exemptions to this rule so that you can get a tax free social event.  To be exempt, the party or similar social function must be all the following:

  • £150 or less per head
  • annual, such as a Christmas party or summer barbecue
  • open to all your employees
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Taking on your first employee

As a business grows so do the demands on the owner.   For some this will lead to making the decision to hire their first employee.  But finding the right person is only the start of the process.  Before taking on your first employee take a look below at the additional requirements that you take on when employing people.

Employment checks

You have a legal responsibility to check that the employee has the right to work.  This could be as simple as checking a passport or as complicated as checking the right to work for an overseas worker.

 

Payroll

The new employee will want to get paid (and not paying less than the minimum wage is definitely not an option!) so you will need some form of payroll.

This will require registering for PAYE with HMRC and then processing the payroll every time you pay someone.

Running a payroll involves calculating the Tax and National Insurance, calculating what is left to pay the employee, issuing payslips to show these calculations and submitting returns to HMRC with these calculations.

 

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Are you trading? – When does selling a few items become a trade

We all sell the odd item from time to time.  But when does this stop being a personal transaction and start being a trade (creating the requirement to register for Self Assessment and paying taxes on any profits).

HMRC does not have clear guidelines but instead gives the vague guidance below

You’re likely to be trading if you:

  • sell regularly to make a profit
  • make items to sell for profit
  • sell online, at car boot sales or through classified adverts on a regular basis
  • earn commission from selling goods for other people
  • are paid for a service you provide
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HMRC – Reasonable excuse to appeal a penalty.

As you probably already know – Pay your taxes late get a penalty! – File a return late – get a penalty!

But are there any excuses that HMRC will accept to avoid a penalty? Well, as you would expect HMRC are not incredibly lenient, otherwise what would be the point of the penalty in the first place! “The dog ate it” is not going to get you much sympathy. However, if you genuinely were trying to submit it but had a reasonable excuse that something stopped you meeting a tax obligation that you took reasonable care to meet then an appeal may be successful.

A few examples include;

• your partner or another close relative died shortly before the tax return or payment deadline
• you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
• you had a serious or life-threatening illness
• your computer or software failed just before or while you were preparing your online return
• service issues with HM Revenue and Customs (HMRC) online services
• a fire, flood or theft prevented you from completing your tax return
• postal delays that you couldn’t have predicted
• delays related to a disability you have

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Budget – Initial points to take away

Philip Hammond has delivered his speech.  Now the exciting/popular/energetic/charismatic people among us will bury our heads in the actual text and find out what the budget actually means for you and me.  As like all budgets, the start is about how well we are doing, how great the economy is and the increases in public spending that are announced.  Then the finer details follow which have a more immediate effect on you and me.  Here are the takeaway headlines that may affect you from his speech.

Growth Forecast

The OBR growth forecast is 1.6% 2019, 1.4% 2020, 1.4% 2021, 1.5% 2022, 1.6% 2023

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MTD Pilot scheme is opened

HM Revenue & Customs (HMRC )opened up their  pilot for the online VAT service for MTD on the 16th October, with HMRC inviting more than half a million businesses to try it ahead of new rules coming into force in April 2019.

HMRC’s press office proudly stated :

“Making Tax Digital (MTD) for VAT will make it easier for businesses to manage their tax and will save them, and their agents, time which can instead be devoted to maximising business opportunities, encouraging growth and fostering good financial planning.

From 1 April 2019, under MTD, around 1m businesses registered for VAT with a taxable turnover above £85,000 will need to keep their VAT records digitally and file their returns using MTD-compatible software.

The pilot opens today for around half a million businesses whose affairs are up to date and straightforward, and will extend to most other business types over the coming months. HMRC has also listened to concerns and will give a small group of customers with more complex requirements a further six months to prepare. This will ensure there is sufficient time for testing the service with them in the pilot before they are required to join.”

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Tax for the owner managed business

Own the shares in the company you work in?  All the different taxes can be tricky to keep track off.  Here’s a brief overview of the primary sources of income and the tax they attract.

The company is its own legal entity

The first thing to understand is that any income/profit made by the company is owned by the company.  As such it attracts company tax which is known as corporation tax.   Those profits are completely separate from you until they leave the company and are passed to you as the owner/employer

Corporation tax

Corporation tax is a tax on the profits of the company.  In its simplest form, it is the income less the allowable expenses of the company and is a percentage of what is left over.

Payment of this tax is made by the company as is due 9 months and 1 day after the year end of the company.

Income for the owner/manager

As an individual you draw income from the business.  This is how you get the profits in the company into your pocket (well probably your personal bank account really!).  As both an employee of the business (usually as a director) and the shareholder of the business you have 2 sources of getting at the company’s profits.

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Software solutions

Accounting solutions that fit you, not fit us and pushed on you.

Holmes and Company have teamed up with a number of accounting software providers – including certified status with the market leaders in this field,  Xero and Quickbooks, and bridging software solutions for Making Tax Digital (MTD) and excel accounts – so we can find the right solutions for our clients.  If you have any software requirements please contact us

   

    

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