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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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Advisory Fuel Rates for ‘pure’ electric cars

HMRC have announced the introduction of an advisory fuel rate for 100% electric cars.

As of 1st September 2018, if your employer provides you with an electric car, you can now claim 4p for every business mile the vehicle is used for.

If you own the electric car personally, you can also charge it for free at work and incur no taxable benefit, and your employer can pay you 45p per mile for the first 10,000 business miles driven in a tax year, and 25p per mile for any additional business miles.

Hybrid and plug-in hybrid cars will continue to be treated as either petrol or diesel models.

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Rent a Room Relief

The government believes that rent a room relief is being abused, with many people believing that the relief can be claimed on properties let out entirely as holiday or short term lets.

The relief will continue at the current threshold of £7,500 per year however an additional condition will apply from 6th April 2019, such that the tax payer must be present in the property for all or part of the time for which the room is let out.

Tax payers will not receive the relief for letting out their house while they are on holiday but taking short holidays during a period of long-term letting to a lodger will not break the conditions of the relief.

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Cloud accounting software

I’ve got accounting software, why do I need cloud accounting software.   The short answer is you don’t.  In the same way your trusty 2nd hand car gets you from A to B just like a Tesla.  But the Tesla has advantages as it utilises modern technologies.

Cloud solutions

Cloud software is all the buzz at the moment.  Especially with Making Tax digital around the corner.  But really all cloud means is that the data and software is held out in the “cloud” not on your local PC or server.   The cloud just means someone else’s server not local to you which you access via the internet.   The advantages of this are no more updates to software, access anywhere you have an internet connection and on multiple devices and reduce costs as you do not need to replace that 10 year old machine sat in the back office that no one knows how it works.

This off course isn’t just limited to just accounts software.  Most IT services now have cloud solutions (And maybe some you use without even thinking about it) including file and record storage, Relationship management software, Email, Practice management to name a few.  But ultimately, if it had a bit of software it probably has a cloud solution available now.

Also, being in the “cloud” makes it easier for other systems to communicate directly with the software.  The most common benefit that shows this is direct bank feeds into the accounts software relegating the need to manually enter all the bank movements.

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Making tax digital

You may have started to hear about Making Tax Digital and over the coming months you will be hearing a lot more about it.  Your current procedure for your financial records may not be compliant with it so action is required now.

But what is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s attempt to move to a digital tax environment – giving real time access to your Tax Information as well as moving you to digital record keeping and submission of tax information.

You can find a detailed overview on the HMRC website at the following link- HMRC – Making tax digital overview but below we will summarise this for you and talk about how it affects you and your business..

Making Tax Digital is an attempt made by the HMRC to do exactly what the name suggests. 

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Sole trader or limited company

Sole trader or limited company? The one thing every business owner has thought about in detail and looked financial implications right?  Well probably not, and there is no right answer that suits every business.  But you should really compare the two routes and see which one is best for you.

Every business – no matter how big or small – must have a legal structure, with the bulk choosing to be either a sole trader or a limited company. An estimated 3.4 million operate as sole traders, with 1.9 million operating as limited companies – so what is the difference between the two? And which could be the best fit for your business?

First – some definitions

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What to Do if You Stop Being an Employer

If your business ceases to employ anyone and you have no plans to take on any more staff, you may want to think about closing your PAYE Scheme.

If you do want to cease your PAYE scheme, you will need to notify HMRC straight away by completing a final payroll return (either a Full Payment Submission (FPS) or an Employer Payment Summary (EPS)).

You will also need to settle any outstanding tax and National Insurance liabilities, and submit any P11D expenses and benefits forms due to HMRC.

For further information, please see your accountant or financial advisor.

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The Warm Home Discount Scheme

With the colder weather starting to rear its ugly head, many people will find their utility bills rising, which can particularly affect the elderly, and those on low incomes.

If you, or someone you know, receive the Guarantee Credit element of Pension Credit, HMRC’s Warm Home Discount Scheme may be able to help offset some of the additional costs, as it offers up to £140 towards your electricity bill, payable directly to the electricity supplier.

The scheme may also apply to people on low incomes who are entitled to certain means-tested benefits.

To check who qualifies, please see further details here.

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