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Numeric Accounting has offices in Salisbury, Wiltshire & in Dibden (near Hythe) in Hampshire. We offer a full range of professional accountancy services to businesses across the UK.

Tax News

Tax relief on training costs explained

Is tax relief available for training costs when setting up a new trade in a limited company?

We have been asked this question a number of times recently.

Corporation Tax Relief is generally available for officer and employee training costs. Income Tax Relief and National Insurance Relief is also available to officers and employees who receive work-related training.

Where a limited company provides training to officers and/or employees a corporation tax deduction is available as long as the expenditure meets the basic requirement of being wholly and exclusively for the purpose of the trade. In most cases, the company will be providing training so employees can better perform their duties in the trade or to advance the companies trade and a deduction will be available.

Employees (including officers) are subject to income tax on any benefit received, however, exemptions for income tax and national insurance are available for ‘work-related’ training.

Where a company provides training costs to any officer or employee which is not work-related, for example, a company manufacturing widgets sending its Finance Director on a candle making course, the costs of the training is not work-related and is therefore taxable as a benefit in kind for the director. The benefit is reportable on the director’s p11d.

The cost of the candle making course is, however, a deductible expense for corporation tax purposes, as it is part of the Finance Director’s remuneration package, and their employment is wholly and exclusively for the purpose of the company trade.

This guidance does not apply to sole traders or partnership businesses.

If anyone has any questions regarding training costs please do get in touch.

News

Stephenson Sheppard & Co go for Rebrand

We have some exciting news that we would very much like to share with you. We have decided the time has come to rebrand the Stephenson Sheppard & Co name, although we will continue to provide the same service.

Technology and work methods in the accounting profession have changed significantly over the last few years and we are now able to offer additional services that can help our clients to grow and become even more successful. Today’s entrepreneur is looking for new solutions to help them progress in a forever modernising world.

A new name and brand will help us to become more visible to the public and provide a new lease of life to the firm. As of the 1st December our name will be ‘Numeric Accounting’ and please look out for future correspondence under our new branding.

Please take the time to look around the new website and resources we already have available for you, including our free App for Apple and Android mobile devices which can be downloaded from the App Store. The App is a useful tool for individuals and business owners and details of its capabilities can be found on the website.

Our email addresses have also changed. Please can you make amend all email addresses you currently hold for us by replacing ‘@stepshep.com’ with ‘@numericaccounting.co.uk’.

We hope you enjoy our future offerings under our new ‘Numeric Accounting’ brand.

Helpful Tips

Paying Personal Self Assessment Tax

The easiest way to pay your tax bill is by faster payment transfer using your online banking service.

If you have had a bill from HMRC this will tell you which bank account to use when making payment. If you are not sure which account to use then go with HMRC Cumbernauld.

Account details to use are:

Sort code: 08 32 10
Account number: 12001039
Account name: HMRC Cumbernauld

or;

Sort code: 08 32 10
Account number: 12001020
Account name: HMRC Shipley

You’ll need to use your 11-character payment reference when you pay. This is made up of your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’. You can find this on your Electronic Self Assessment Tax Return (middle of page 1).

Tax News

Pension Tax Relief Restricted for Higher Earners

As mentioned in the Conservative party manifesto, tax relief for pension contributions is to be restricted for those with income in excess of £150,000 a year. We were told that this is intended to fund the increase in the inheritance allowance for passing on the family home.

The current £40,000 pension annual allowance will be reduced by £1 for every £2 of income in excess of £150,000 down to a minimum of £10,000 at £210,000 of income. So, for example, where an individual has income of £170,000 in 2016/17, the £40,000 annual allowance would be reduced to £30,000.

Note also that, as already announced, the pension lifetime allowance is due to be reduced from £1.25 million to £1 million from 6 April 2016 with transitional protection for those with pension savings in excess of the new limit.

The Chancellor has also announced in the July Budget that there would be a further review of pension savings and pensions taxation.

Contact us if you need advice on pension planning and how the new pension rules will impact on you personally.

Tax News

Corporation Tax Rate to be Cut to 18%

The current UK corporation tax rate of 20% is the lowest rate in the G20, the 20 major trading nations. This rate continues to apply until 2017 when it has been announced that the rate will be reduced to 19% and then 18% in 2020. This appears to make trading via a limited company more attractive but note that there are significant changes to the taxation of dividends that take effect from 6 April 2016.

Tax News

Buy to Let Landlords – Interest Relief to be Restricted to Basic Rate

The Chancellor announced that the amount of income tax relief landlords can get on residential property finance costs (such as mortgage interest) will be restricted to the basic rate of tax. To give landlords time to adjust, the change will be phased in gradually over a 4 year period:

  • 2017/18 – the deduction will be restricted to 75% of finance costs, with 25% being available as a basic rate tax reduction.
  • 2018/19 – 50% finance costs deduction and 50% given as a basic rate tax reduction
  • 2019/20 – 25% finance costs deduction and 75% given as a basic rate tax reduction

From 2020/21 – all financing costs incurred by a landlord will be given as a basic rate tax reduction.

Tax News

Annual Investment Allowance set Permanently at £200,000

The annual investment allowance (AIA) was due to be reduced from the current temporary level of £500,000 to just £25,000 from 1 January 2016. However the Chancellor has bowed to pressure from industry to stop tinkering with this allowance for expenditure on plant and machinery and set it at a permanent level so that businesses can plan their capital expenditure. He has decided on £200,000 for the new limit and businesses should consider bringing forward expenditure to before 1 January 2016 to benefit from the current higher allowance.

News

New ‘National living Wage’ Tax Credit Changes

The most radical announcement by the Chancellor on 8th July was a significant reduction in the amount the government plans to spend on tax credits and other State benefits. At the same time he announced that there would a new national living wage to be paid by employers, rising to £9 an hour by 2020.

This strategy combined with the increase in the personal allowance to £11,000 for 2016/17, and eventually £12,500, means that employees will keep more of what they earn but the tax credits received to top up their income will be significantly reduced.

Employers will need to assess the impact of this change on the profitability of their business and we can help you consider this in more detail as there are other factors such the increase in the employment allowance to £3,000 next year and the planned reductions in the corporation tax rate that may also be relevant to your business.

Tax News

Inheritance Tax and the Family Home

As mentioned last month the Chancellor has confirmed the introduction of an additional inheritance allowance that will be available in addition to the current £325,000 nil rate band which will, when fully phased in, allow a couple to pass on the family home tax free up to a value of £1,000,000.

The additional allowance, which will also be transferrable to the surviving spouse, will start at £100,000 for 2017/18. The allowance will then increase to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. Unfortunately the Chancellor also announced that the inheritance tax nil rate band will be frozen at £325,000 until 6 April 2021.

The main residence nil band is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000. This clawback is based on the value of the estate before reliefs such as business property relief and agricultural property relief and may result in some additional complications and redrafting of Wills.

If this change is likely to affect your family circumstances you may wish to arrange a meeting with us to consider the impact on your family’s inheritance tax position.

Tax News

Changes to Taxation of Dividends

The Chancellor has announced that from 6 April 2016 there will no longer be a notional tax credit associated with dividends received and the following rates will apply after a £5,000 tax free dividend allowance (which will be treated as a nil rate band):

  • Basic rate taxpayers – 7 ½%
  • Higher rate taxpayers – 32 ½%
  • Additional rate taxpayers – 38.1%

This will mean that from 2016/17 individuals will be able to receive up to £17,000 tax free:

  • Personal allowance £11,000
  • Tax free interest £1,000
  • Tax free dividends £5,000

A common strategy that we often advise to family company director/shareholders is that they extract profits from their company by way of dividends instead of paying themselves a salary. This is because there are no national insurance contributions on dividend payments and where the dividend income falls within the basic rate band (up to £42,385 for 2015/16) there is currently no income tax on dividends.

Where both husband and wife are directors and shareholders they will be able to pay themselves a salary of £11,000 each for 2016/17 and then dividends of £5,000 each tax free. However the next £27,000 of dividends up to the new £43,000 higher rate threshold would be taxed at 7 ½ % resulting in income tax of £2,025 each being payable for 2016/17. Under the current rules there would be no tax on such dividends up to £42,385.

This measure has been introduced to counter tax-motivated incorporation to level the playing field between trading via a company versus an unincorporated business. Note that dividends received in excess of the £43,000 higher rate threshold will be taxed at 32.5 % but without a notional credit thus increasing the effective rate from the current 25% to 32.5%.

In most cases it is still most tax efficient to draw dividends rather than an increased salary.

News

Tax returns filed on time?!!

Hopefully your tax return was in by the end of last month!  If not, what excuse will you give?  Paperwork destroyed in a yacht fire and wasp attack in a car were apparently among the top ten excuses that HMRC received last year to explain late tax returns.  Another was ‘I could not complete my tax return because my husband left me and took the accountant with him.’  Nothing to do with us I should add!!!

Tax News

Government U-Turn on Self-Employed NICs, for Now

During his first Budget on 8th March, new Chancellor Phillip Hammond announced to the world that he would  level the playing field between employees and the self-employed by increasing Class 4 National Insurance Contributions from 9% to 10% from April 2018 and then to 11% from April 2019. In justifying this change he explained that the self-employed are now entitled to more generous State Benefits than in the past, and thus the NIC rate should be increased towards the 12% Class 1 NIC rate paid by employee’s.

However, this was in fact contrary to the Conservative Party manifesto pledge not to raise income tax, national insurance contributions and VAT during the life of the Parliament and since the announcement the Government have bowed to political pressure and decided not to proceed with this proposal. However with the next general election set for 8th June we will wait with bated breath for a possible increase shortly after!

As previously announced, flat rate Class 2 NIC contributions, now £2.85 a week, cease on 5 April 2018.

Tax News

Digital Reporting to Start in April 2018, but Delayed for Smaller Businesses

Legislation to introduce Making Tax Digital (MTD) was planned to be included in the Finance Bill 2017, however Theresa May’s announcement of the general election for the 8th June has meant it is currently withdrawn until it can be properly debated. The Government is still very much committed to MTD which is still scheduled to start in April 2018 with the first quarterly updates being submitted by the self-employed and property landlords in July 2018.

Many business owners, professional advisor’s and the Treasury select committee had expressed concerns about the timescale for the introduction of MTD. The Chancellor therefore announced that there will be a one year deferral in the start date to 2019 for self-employed businesses and property landlords with gross income below the VAT registration limit. Another way of delaying the start of Making Tax Digital (MTD) would be to change the year end of your business. The proposed legislation currently specifies that MTD will apply to accounting periods commencing on or after 6 April 2018. This means that if you currently prepare accounts to 30 April then the first quarterly update to be submitted to HMRC will be for the period to 31 July 2018. However, if you changed the accounting date of your business to 31 March then the first quarterly update would be for the period from 1 April to 30 June 2019.

There will be no late filing penalties in the first year of the new system and the deadline for finalising taxable profit for a period will be the earlier of:

• 10 months after the last day of the period of account, or
• 31 January following the year of assessment in which the profits for that period of account are chargeable

Businesses and property landlords with a turnover up to £150,000 will be able to prepare accounts on a cash basis Digital quarterly reporting for companies and larger partnerships will not be introduced until April 2020. These changes will have a significant impact on how you keep your business accounts and communicate with HMRC and in most cases it is highly recommended that people take on a suitable accounting software package, such as Xero, to get over the hurdle.

Please contact us to discuss the impact of these changes on the way that you keep your accounts and the best possible solution’s to help.

Tax News

IR35 Legislation Changes for Workers in the Public Sector

There are significant changes from 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.

From 6 April 2017 the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company. An online tool called “The Employment Status Service” has been made available by HMRC and can help them make that decision. The tool can be used if the worker uses either an employment agency, or other third-party to get work.

These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016. Please contact us if you want to discuss whether or not these rules affect you or your organisation.

Tax News

Dividend Allowance to be Reduced

During the March budget the Chancellor announced measures to limit the rise in tax-driven incorporation. The £5,000 tax free dividend allowance introduced by George Osborne will now be reduced to just £2,000 from 6 April 2018. Mr Hammond claimed that many smaller owner-managed businesses have incorporated as limited companies mainly for tax reasons. Typically the director/shareholders of such businesses have paid themselves in dividends and paid less tax than similar unincorporated businesses.

Currently, once the dividend allowance has been used the remaining dividends are taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. There are rumours that these dividend rates may also be increased in future years.

Although the cut in the tax-free dividend allowance is clearly aimed at owner managed companies, it will also impact on those with substantial share portfolios. Mr Hammond reminded us in his speech that the annual ISA investment limit increases to £20,000 from 6 April 2017 and that dividends on shares held within an ISA continue to be tax free.

News

Crazy charity bike rides!

Having completed John O’Groats to Land’s End on a bike in 11 days in 2015 in aid of Salisbury Hospice, 2016 was a year off from any serious biking challenges (apart from the odd 100 miler or two!).

2017 is a different story!  In just under 2 weeks time I will be embarking on a 4 day 140 mile trek off road through the Lake District, taking in some stunning scenery and seriously challenging climbs (roughly 16,000 feet in total!) and descents over some very rugged terrain that will test both bikes and riders to their limits.  This will be done carrying all clothing and gear for the expedition – there is no support vehicle!

 

The ride is being done in aid of the Yorkshire Cancer Centre Appeal which raises funds for St James’s Institute of Oncology (Jimmy’s) in Leeds, which provides specialist medical equipment, research and development and patient ‘home comforts’ for cancer patients.

If anyone feels able to sponsor me for the event I will be extremely grateful.  You can make a donation via the following Just Giving link.  This link also provides a bit more information on the charities and the crazy fools who have taken up the challenge!

https://www.justgiving.com/fundraising/Richard-Moore53

Watch out for details of Bournemouth to Paris in aid of Julia’s House later this year!

Thanks for your continued support.

Jon Baggot

Tax News

Personal Tax Rates & Allowances – Tax Year Ended 5 April 2018

Now that the 2017 finance act has been published we are happy to confirm the tax rates, bands and allowances to be used for individuals, for the current tax year ended 5 April 2018.

The personal allowance has been increased to £11,500 but as in previous years, the allowance is reduced by £1 for every £2 by which income exceeds £100,000 i.e. those with income of £123,000 or more will loose theirs. The marriage allowance, which allows people to transfer 10% of their personal allowance to their spouse/civil partner as long as the recipient is not a higher or additional rate taxpayer, is therefore £1,150. Claiming the marriage allowance is worthwhile where not to would mean personal allowance is wasted. The allowance give a total £230 saving for the one benefiting.

The married couples allowance (which is not the same thing as the marriage allowance) is available to married couples and civil partners where one or both were born before 6 April 1935. The allowance is set at £8,445, but reduced by £1 for every £2 by which income exceeds £28,000 until it reaches £3,260.

The tax-free savings allowance remains at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. Those paying tax at the additional rate do not receive a savings allowance.

The new rules for the taxation of dividends (from April 2016) saw all taxpayers being entitled to a dividend allowance regardless of the rate at which they pay tax. This allowance is unchanged at £5,000, however we now know the plan is to reduce it to £2,000 from 6 April 2018.

Moving on to tax rates & bands for 2017/18 it is worth noting that basic rate income tax remains at 20%, higher rate at 40% and the additional rate is still 45%. For the UK (but excluding Scotland) the basic rate band is set at £33,500 and the additional rate of tax applies to taxable income exceeding £150,000.

Finally dividends in excess of the dividend allowance (above) are still taxed at 7.5% where they fall within the basic rate band, 32.5% at higher rate and 38.1% if within the additional rate band.

Capital gains tax

It is good news all around for CGT with the annual exempt amount increasing to £11,300 for the tax year ended 5 April 2018. In addition to this the new favourable tax rates remain unchanged at 10% to the extent that total income and gains do not exceed the basic rate band, and 20% where total income and gains exceed the basic rate band. Unfortunately the higher rates of 18% and 28% respectively which apply to gains on residential property remain unchanged also.

If you need advice in this area then we are here to help.

News

Our 80s Summer Party Boat Experience

7:30 pm on Saturday saw the start of a crazy night out away from the office for the team at Numeric Accounting. It was agreed that an 80’s Summer Party on board a disco boat with Blue Funnel, out of Ocean Village, Southampton, was definitely worth a go. And it turned out to be a fantastic fun time for everyone.

The evidence has now emerged and please see for yourself:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Client News

New Anti-Money Laundering Directive brings New Filing Obligations in relation to ‘Persons with Significant Control’

As you know from April 2016 Limited Companies in England & Wales were required to keep an up to date register of Persons with Significant Control (PSC). Also from 30th June last year it also became necessary to update Companies House with this information using the Confirmation Statement (form CS01), previously known as the Annual Return.

On 26th June this year we had a new Anti-Money Laundering Directive (4AMLD) brought in to lower the occurrence of money laundering and terrorist financing in the UK. Immediately this brings a change to ensure that the PSC register is kept accurate and up to date. From this date any changes to the PSC register need to be updated at Companies House within 28 days of the change taking place.

So if a company has a change in director/shareholder or structure, and this results in a change in the PSC details held i.e. a new PSC is created or an existing one removed, there is a change in the percentage/nature of control or influence of a PSC, or even just a change in personal details of an existing PSC, then the register must be updated within 14 days of the change, with a further 14 days to update Companies House using form PSC01 or PSC09 as appropriate. It is no longer appropriate to update Companies House once per year using the form CS01.

If you require any help or further guidance in this area then please do let us know.

 

Client News

The Key Points From the Autumn 2017 Budget

“BUILDING A BRITAIN FIT FOR THE FUTURE” 

This was the main theme of the Chancellor Phillip Hammond’s second budget as he committed to spending more on infrastructure projects and stimulating the housing market. He had to put on a good performance to keep his job after criticism following the Spring Budget. His jokes were better this time but there was very little good news on the tax front and some worrying economic figures, particularly the growth forecasts. A stamp duty holiday for first-time homebuyers was hotly tipped prior to the Budget but nevertheless it was still a surprise that the duty for such buyers was abolished for purchases up to £300,000.

SDLT RELIEF FOR FIRST-TIME BUYERS

In an attempt to help first-time buyers get on the property ladder and stimulate the housing market the chancellor announced that for property purchases completed on or after 22 November 2017 there would be no SDLT payable if the purchase price is below £300,000.

This will be a permanent measure rather than a temporary holiday. Those claiming the relief will pay no SDLT on the first £300,000 of the consideration and 5% on any remainder. No relief will be available where the total consideration is more than £500,000. It should be noted that were a property is bought in joint names it must be the first property owned by all purchasers.

PERSONAL ALLOWANCE AND HIGHER RATE LIMIT INCREASED

The Chancellor reminded us that the government are committed to increasing the personal allowance to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, the personal allowance for 2018/19 was only increased in line with inflation to £11,850 and the higher rate threshold to £46,350.

Note that up to 10% of the personal allowance (£1,185) may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer. This transfer will now be available on behalf of deceased spouses and civil partners, and the claim may now be backdated for up to four years where the entitlement conditions were met.

NO CHANGES IN TAX OR NIC RATES

The basic rate of income tax and higher rate remain at 20% and 40% respectively and the 45% additional rate continues to apply to income over £150,000.

Although Class 2 National Insurance contributions (NIC) for the self-employed are being abolished from 6 April 2019 and “merged” with Class 4 contributions the Chancellor did not dare mention an increase in the current 9% Class 4 rate this time!

There had been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate.

The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2018/19. Dividends on shares held within an ISA continue to be tax free.

IR35 “OFF-PAYROLL” RULES MAY BE EXTENDED TO PRIVATE SECTOR

Although not mentioned in the Budget speech the other documents released on Budget day mention the possible extension of the rules for personal service companies in the public sector to workers in the private sector.

The government will consult in 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation which currently only applies in the public sector seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company.

CHANGES TO DIESEL  COMPANY CARS

Company car benefits are based on CO2 emissions data which has encouraged employees to choose diesel cars due to lower CO2 emissions. The government is trying to reduce the number of diesel cars and will increase the current 3% diesel supplement to 4% from 6 April 2018.

As previously announced radical changes to the company car benefit rules are being introduced in 2020. The benefit in kind for electric cars and hybrid cars with a range of 130 miles or more on the electric motor is being reduced to just 2%. That means that the taxable benefit for such a car with a list price of £30,000 would be just £600 a year. Where the employer allows staff to charge their own electric car at work there will be no taxable benefit.

EIS TAX RELIEF INCREASED FOR INVESTMENT IN TECH BUSINESSES

The Government will double the amount that an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies.

The annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs will be increased to £10 million from the current limit of £5 million. The lifetime limit raised by such companies will remain the same at £20 million.

R&D TAX RELIEF INCREASED

The rate of the R&D expenditure credit is being increased from 11% to 12%, in order to support business investment in R&D. This is the relief available to those companies that do not qualify for the more generous relief available to SMEs.

VAT REGISTRATION LIMIT FROZEN

The VAT registration limit normally increases in line with inflation each year, however the limit has been frozen at £85,000 until 1 April 2020. At the same time the deregistration limit remains at £83,000.

There had been rumors that the VAT threshold would be reduced so that more businesses would be required to charge VAT on their sales. The UK currently has the highest VAT registration threshold in Europe.

Note that the introduction of Making Tax Digital (MTD) for VAT in April 2019 will apply to those businesses above the registration limit. Freezing or reducing the threshold will bring more businesses within the scope of MTD.

BUSINESS RATES RELIEF FOR SMALL BUSINESSES

There has been much lobbying from the small business sector to reduce business rates. The Chancellor stated that 600,000 small business currently benefit from small business rates relief.

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In order to support the licensed trade  from April 2017, pubs with a rateable value up to £100,000 are able to claim a £1,000 business rates discount for one year. This relief has now been extended until March 2019.

MILEAGE ALLOWANCE FOR BUY TO LET LANDLORDS

Another measure hidden away was the proposal that buy-to-let landlords will be able to claim 45p a mile for necessary visits to their rental properties.

This will be as an alternative to claims for capital allowances and deductions for actual expenses incurred, such as fuel.

DIARY OF MAIN TAX EVENTS

DECEMBER 2017 / JANUARY 2018

Date What’s Due
1/12  –  Corporation tax for year to 30/04/2017 unless quarterly instalments apply.
19/12 – PAYE & NIC deductions, and CIS return and tax, for month to 5/12/17 (due 22/12 if you pay electronically).
30/12 – Deadline for filing 2016/17 tax return online in order to request that HMRC collect outstanding tax via the 2017/18 PAYE code
1/01  –  Corporation tax for year to 31/05/16.
19/01 – PAYE & NIC deductions, and CIS return and tax, for month to 5/01/18 (due 22/01 if you pay electronically).
31/01 – Self-Assessment tax return for 2016/17 due, together with balancing payment and 50% payment on account of 2017/18 tax.