How To Reduce Debtor Days And Improve Cash Flow
Reduce your debtor days and improve your cash flow!
Cash flow is king in any business. Yet cash flow is one of the areas your business might be struggling to manage.
Your customers might be reluctant to part with their money, even if it’s to pay for your goods or services. As such, it can take a while for them to pay their invoices. While longer debtor days might not be a big issue for huge international corporations, for the rest of us, it can be a very real source of stress. You need your customers to pay you as quickly as possible so you can continue to run your business, so it’s easy to find yourself working extra hours, chasing up late-paying clients. Here are a few tips to help you reduce your debtor’s days.
When it comes to cash flow: be clear and concise
When creating an invoice, think about your messaging. Is the due date easy to see on the page? Does your invoice state exactly how much payment is required? And have you clearly outlined the various payment options you accept (such as bank transfers, cash, cheque, etc.)? You should clearly set out options such as “pay now”, “pay by instalments” or “pay on the due date”.
Offer incentives to improve your cash flow
Sometimes offering a small discount can motivate your clients to pay you on time. Offering say, 5% off the total bill for clients who pay within 2 weeks of the invoice date, can help your business to get cash in quicker. If you set this type of incentive out at the beginning of your client relationship, it will go down well with clients, as they will see the early payment discount as a “value add”.
More cash flow for you: charge fees for late payment
You can incentivise customers to pay you on time by charging a fee for late payments. If you communicate the terms and conditions around late fees clearly, clients will not be surprised if they are charged for late payment. If you are going to charge clients for late payment, it is usually effective to give some sort of warning. It may be helpful to send clients an email saying that “payment is due in 10 days time, and if it isn’t received, a late payment fee will be applied.” This gives your client an opportunity to respond.
Stay on top of your cash flow and embrace technology
There are a vast array of systems available to help your business track invoices, monitor payments and manage clients who have missed payment deadlines. With an automated accounts receivable system, you can keep track of the status of each invoice, who has paid and what is outstanding. You can set up automatic reminders at crucial moments in the payment cycle, and significantly reduce your administration time.
By implementing the above strategies, you can reduce debtor days in your business and ensure that you are getting cash in as quickly as possible.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Christmas: How To Organise Staff Parties & Gifts Tax free
Christmas Parties and Presents
Did you know that the taxman is not entirely lacking in Christmas spirit? If you are an employer, the tax system features a number of exemptions which enable you to put on a party for staff or to give your employees a seasonal gift, without triggering an unwanted tax liability. However, you should also know that the taxman’s generosity is limited, and the message here is to keep it modest.
Staff Christmas parties
When considering Christmas staff parties, you should take into account that there is no specific exemption, but there is one for annual parties and functions and it is this exemption which provides the opportunity for your staff – and their guests – to enjoy a Christmas party, without being hit with tax charge once the decorations have been packed away. In addition, as with all exemptions, availability is contingent on the associated conditions being met.
Function must be an annual function
And when it comes to tax exemption, you need to be aware that not all functions are equal. The tax exemption only applies to your annual parties and functions. Consequently, if you hold a staff Christmas party every year, you could take advantage of the exemption to keep it tax-free. However, if your Christmas party is not a regular occurrence and you decide to hold a party for staff this year as a one-off, for example to celebrate a successful year, the exemption will not apply and your employees will be taxed on the resulting benefit in kind.
Exempt amount capped at £150 per head
On top of that, the exemption only applies to your annual function if the cost per head is £150 or less including VAT. This is simply the total cost of your function divided by the total number of people attending, including both employees and any guests. If you also provide accommodation or transport, you also need to know that these are taken into account in working out the total cost of your function. VAT is also included, even if this is subsequently recovered where you are VAT-registered. If you only hold one annual function in the tax year, it will be tax and National Insurance free, as long as the cost per head figure is not more than £150.
Exceeding the £150 per head limit
To add to that, the £150 per head figure is an exemption not an allowance, and if the cost of your function is more than £150 per head, the total amount is taxable, not just the excess over £150. This means that if the cost per head is £155 per head, an employee attending alone would be treated as receiving a taxable benefit, with a taxable value of £155. Where an employee attends with a partner, the employee is taxed on their partner’s attendance too – in this case the taxable benefit would be £310. You will also face a Class 1A National Insurance charge where the provision of your party is taxable on employees, as a benefit in kind. So bear in mind that going slightly over the £150 cost per head limit can be expensive – and that there is no tax or employer-only Class 1A National Insurance for you to pay for an annual party where the cost per head is £149; however, the story is very different if it creeps up to £151 per head. The moral here is for you to keep a close eye on your costs.
More than one annual function
Where you hold more than one annual function in the year, the exemption can be allocated in such a way as to minimise the overall tax bill. Your annual functions will all be tax-free, as long as the total cost of all your functions is not more than £150 per head. For example, if you were to hold an annual Christmas party costing £50 per head and a summer barbecue costing £40 per head, both will remain tax free as the total cost per head figure of £90 is less than the permitted £150. If the total cost of all your functions is more than £150, the exemption can cover whole functions in such a way as to give the best result. For example, if you hold three annual functions costing respectively, £70 per head, £60 per head and £40 per head, at first sight the exemption is best applied to the £70 and £60 functions (a total cost of £130 per head). The remaining £20 is lost, as it cannot be set against the £40 per head function – only whole functions can qualify for the exemption. The best result may be different if guests are invited to some of your functions, but not to others. In the last example, if your employees bring a guest to the £40 function, the exemption is best utilised against the £70 and £40 per head events. Leaving the £40 function in charge will mean that your employee suffers a taxable benefit of £80 (£40 for the employee and £40 for their guest); leaving the £60 function in charge reduces the total taxable benefit to £60. There is no substitute for you doing the sums.
Consider a PSA
Another thing, if a taxable benefit arises in respect of your staff Christmas party, either because the function is not an annual function or because the cost per head figure exceeds the £150 exempt limit, you could consider using a PAYE Settlement Agreement (PSA) to settle the tax liability on behalf of your employees, to preserve your goodwill gesture. A PSA is an agreement with the tax inspector under which you pay the tax and associated National Insurance on behalf of your employees. If you want to know more about this, information on using a PSA can be found online.
Deduct the cost in computing profits
The general prohibition on tax deductions for entertainment expenses does not apply to staff entertaining. Consequently, the costs of holding your staff Christmas party can be deducted in computing the employer’s taxable business profits.
Seasonal gifts
At Christmas, you may wish to show your appreciation by making gifts to your staff, customers and suppliers. The rules on gifts can be quite complicated and it is important you understand when a tax charge may arise on the recipient, and what you can deduct when computing its profits.
Staff gifts
It is possible to give your staff small seasonal gifts, without triggering an associated tax charge. Your typical gifts could include a bottle of wine, a small hamper, a box of chocolates and suchlike. The relevant exemption here is the one for trivial benefits, which enables your employees to enjoy small non-cash benefits, costing no more than £50. Unless your employee is a director of a close company, there is no limit on the number of tax-free gifts of £50 and under, that your employee can enjoy each year; for close company directors, there is a £300 annual limit. You should be aware that there are conditions which must be met for the exemption to apply, though. Your gifts must not be in cash or in the form of a cash voucher and it must cost you £50 or less to provide. Further, your gift cannot be reward for services, and there must be no contractual obligation to provide it. Keeping seasonal gifts within the trivial benefits exemption will prevent a tax charge from arising. Detailed guidance on the trivial benefits exemption can be found in HMRC’s Employment Income Manual. Be aware that cash gifts and cash vouchers are liable to PAYE and employer and employee National Insurance. If a tax liability does arise, for example because the cost is more than £50, it will be taxed on your employee, as a benefit in kind, and will need to be reported to HMRC on the employee’s P11D. An employer-only Class 1A National Insurance liability will also arise. Again, you could consider using a PSA, to meet the liability on behalf of your employees. As with staff parties, you can deduct the cost of staff gifts, when computing their taxable profits.
Gifts to third parties
You’re probably familiar with the fact that it’s also traditional at Christmas to give a small gift to key customers and suppliers as a ‘thank you’. However, the rules here are harsh; gifts to third parties are deemed to be entertaining, in respect of which a tax deduction is denied. There is however a workaround – your gift will be tax deductible if the cost does not exceed £50 per person per tax year, and it features a conspicuous advert for the business. In addition, it cannot be food, drink or tobacco (or a voucher exchangeable for food, drink or tobacco). Consequently, to benefit from a deduction for gifts to third parties, go for a business diary or a pen featuring an advert for your business, rather than a bottle of wine.
Keeping it tax-free
To keep your Christmas parties and seasonal gifts tax-free, the trick is for you to keep it small and make use of the available exemptions. Plan ahead and make sure that the cost figures do not creep up.
Lotuswise Chartered Accountants and Business Consultants can support your business with the complexities of these tax and payment rules and help you succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Could You Claim Small Business Rate Relief?
Small business rate relief & business rates
Did you know that business rates are payable on non-domestic properties such as offices, shops and factories. And that the rates are worked out on the rateable value of the property, but there are various reliefs available including small business rate relief. You should also know that the relief is not given automatically and that, as a small business, you could be overpaying, not realising you are entitled to the relief. However, all is not lost; claims for your relief can be made retrospectively, giving rise to a repayment of overpaid business rates.
The business rates calculation
So how do you calculate business rates, we hear you ask? Well, they are worked out by applying the relevant multiplier (set in terms of pence in the pound) to the rateable value of your property. In addition, we know that the most recent valuation took place in 2015, and is used as the basis for all business rate calculations from April 2017 onwards. And you can check the rateable value of your business property online. You should note that the rateable value is based on the annual rent that could be expected to be received if the property were let on a commercial basis.
To add to that, we also know that in England, there is a standard multiplier and a small business multiplier. The standard multiplier, set at 50.4p for 2019/20, applies to business properties with a rateable value of £51,000 or more. The small business multiplier, applying to business properties with a rateable value below £51,000, is set at 49.1p for 2019/20. The multipliers for the City of London are higher – the standard multiplier is 51p and the small business multiplier is 49.7p. In Wales, there is a single multiplier of 52.6. So, for example, the annual business rates for a property with a rateable value of £20,000 outside London would be £9,820 – found by applying the small business multiplier of 49.1p to the rateable value of £20,000.
Small business rate relief
Furthermore, if your business is in England, small business rate relief is available where your business has only one property and the rateable value of that property is less than £15,000. Full relief is available where the rateable value is less than £12,000 – business with a single property which has a rateable value of less than £12,000 pay no business rates. And taper relief is available where the rateable value is between £12,001 and £15,000. The taper reduces the amount of relief from 100% for properties with a rateable value of £12,000 to 0% for properties with a rateable value of £15,000. The percentage reduction is found by applying the following formula: (£15,000 – x) / (£15,000 – £12,000) x 100%.
Small business rate relief example
Let’s say you are a small business operating from offices with a rateable value of £12,750, and your business is based in Norfolk. The business rates applicable to you, before deducting small business relief, are found by applying the small business multiplier of 49.1p to the rateable value of £12,750, giving you a figure of £6260.25. Taper relief is available. The percentage reduction is 75%. Thus, applying small business relief reduces your business rates by 75% to £1,565.06.
Claim the small business rate relief
Unless you make a claim, your business will not benefit from the relief. And your claim must be made to the relevant council, either in writing or online. Once you’ve made your claim, it will be applied to future years. What’s more, claims can be backdated, so check bills since the start of the current system in April 2017. On top of that, you may not realise this but, small business rates relief is not given automatically, and you may be due sizeable repayments. Unless you make that claim, you will continue to overpay. So take action today!
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of business rates, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Why File Your Tax Return By 30 December?
File your tax return by 30 December
Your 2018/19 self-assessment tax return must be filed online by midnight on 31 January 2020, if you want to avoid a filing penalty. A later deadline applies where you were not given a notice to file your return until after 31 October 2019 – in this case, the deadline is three months after the date of the notice. However, it can be beneficial to file your tax return by 30 December 2019, rather than waiting until 31 January 2020.
Why file your tax return by 30 December?
Filing your 2018/19 tax return online by 30 December 2019, may mean that any underpayment can be collected, through an adjustment to your tax code. This may be preferable to having to pay it in one instalment by 31 January 2020. Instead collection of the underpayment is spread throughout the following tax year. The option to have tax collected through your tax code is available where:
- Your return is filed online by 30 December 2019, or a paper return was filed by 31 October 2019;
- The underpayment is less than £3,000; and
- You, as a taxpayer, already pay tax under PAYE, for example, because you are an employee or because you receive a company pension.
However, HMRC will not collect an underpayment via an adjustment to a tax code if you, as a taxpayer, do not have sufficient PAYE income to allow for the repayment, or if as a result of coding out the underpayment, you, as a taxpayer, would pay more than 50% of your PAYE income in tax or would pay more than twice as much tax, on your PAYE income as you would do otherwise.
No need to tell HMRC you want an underpayment coded out
Where your tax return is submitted online by 30 December deadline, and the conditions for coding out an underpayment are met, HMRC will automatically adjust your tax code for 2020/21, to collect the underpayment for 2018/19. If you have just been organised in filing your tax return, ahead of time, and do not want an underpayment coded out, you must let HMRC know, by ticking the relevant box on your tax return.
How does the adjustment work?
The underpayment is collected by grossing it up, at your marginal tax rate, and treating it as a deduction from your personal allowances, to which you are entitled. For example, if an employee has a tax underpayment of £300 for 2018/19 relating to, say, dividend income and the taxpayer pays tax at 40%, the relevant adjustment to the tax code is £750 (£750 @ 40% = £300). Assuming the taxpayer has a personal allowance of £12,500 for 2020/21, and no other adjustments to their code, their allowances will be reduced by £750 to £11,750, giving rise to a tax code for 2020/21 of 1175L. The underpayment is collected in equal instalments, over the course of the tax year. Where the employee is paid monthly, the £300 underpayment would be collected in 12 instalments of £25. This may be much less painful than paying it all in one hit.
Action point
Consider whether it would be beneficial to file your tax return by midnight on 30 December 2019, to enable a tax underpayment to be deducted from your pay.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of your tax return, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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5 Things You Should Know About Thought Leadership
5 Things You Should Know About Thought Leadership
1. What Is Thought Leadership?
Thought leadership can be a very effective marketing tool for you, but successfully implementing your thought leadership strategy, is a lot harder that it sounds. As such, a good thought leader is someone who, based on their expertise and perspective of an industry, offers unique guidance, inspires innovation and influences others. And their views on a particular subject are taken to be authoritative.
2. How do you become a professional who applies thought leadership?
To become recognised as a thought leader by your peers, you’re going to have to write, speak, produce content such as video, be interviewed and produce original ideas about the topic you want to specialise in. You need to be passionate about your topic or you are unlikely to succeed in becoming a thought leader in that area. Focus on a niche area – if your topic is too broad or is already covered by lots of other industry experts, you risk getting lost in all the noise.
3. What should be your thought leadership angle?
Once you’ve identified your topic, consider the angle. Are you going to challenge conventional thinking? Have you got an original idea that helps you stand out? Go beyond just collecting and disseminating existing information into usable chunks for your audience. Look at your target market – what challenges do they face in their business or personal lives. Perhaps there is a gap where your firm’s product or service can help? Consider how you could go about educating your target audience in a way that adds value for them. Social media makes it easier than ever to disseminate thought leadership material. Start by producing a blog on LinkedIn. Set yourself a target to update your LinkedIn blog once a month, focussing on expressing and articulating your thoughts on your chosen topic in way that is relevant to your target audience.
4. Thought Leadership research?
Carry out research which relates to your topic, you could perhaps create your own online survey. Use that research to substantiate your point of view. Draw on your own customer data and use this to develop your thinking and report on your results. Over time, you will start to gain some recognition among your target audience. As your reputation builds, expand your range of communication channels to include articles for industry magazines, e-news updates, newsletters and posts on your company website.
5. Thought Leadership speaker!
Make yourself available to speak at industry conferences and be open to responding to enquiries from the media and trade press. The more you put yourself, your content and your views out there, the more your reputation will grow and develop. Make a point of sitting down at least once a year to create, review and update a rolling thought leadership plan. Consider what it is you’re trying to achieve and set out your objectives for your thought leadership to support your overall goals.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Off Payroll Working Rules: This Is What You Need To Know
Off-Payroll Working Rules: Are You Ready?
Whether you are a large or medium-sized organisation, paying workers via personal service companies or agencies, you will need to operate new off-payroll working procedures from 6 April 2020. The new rules will apply to partnerships, LLPs and larger charities, as well as limited companies. If you are classed as “small” under the Companies Act criteria, you will fall outside the new rules. Either way, from 6 April 2020, you will be required to determine whether or not your worker would be categorised as an employee of your organisation, if directly engaged. Your determination will need to be communicated to the agency supplying your worker, so that income tax and national insurance is deducted from any payments. With that in mind, you should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out that determination. You should also give a copy of your determination directly to your worker.
Off-Payroll Working : What If Your Worker Disagrees?
Where your worker disagrees with their employment status determination, they should contact you as the end user organisation straight away, setting out their grounds for their disagreement. You must then provide a response within 45 days of receiving the disagreement. During this time you (as the end user organisation) should continue to apply the rules in line with your original determination.
Radio Presenter Wins IR 35 Personal Service Company Case in Off-Payroll Working Issue
The extension of the “off-payroll” working rules to the private sector, mentioned above is planned for April 2020. But in the meantime, tax tribunal decisions are still being decided against HMRC. In a recent case involving a radio presenter working for TalkSport, it was decided that the presenter would not have been an employee, if directly engaged. A key factor, was that the level of control over the presenter, fell far below the sufficient degree required to demonstrate a contract of service. The accountancy bodies have been lobbying the government to take the judges’decision in this, and the recent case involving Lorraine Kelly, into consideration, when they update their CEST software, used to determine employment status.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of off-payroll working rules & IR35, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Do You Have Your EORI Number, In Case Of No Deal Brexit?
Economic Operator Registration Identification
As a UK business, you will need an ‘Economic Operator Registration Identification’, EORI number, to trade with the EU, after Brexit.
If There is A ‘No-Deal’ Brexit
In the event that the UK leaves the EU on 31 October 2019 without a deal, your business will need an EORI number, that starts with GB, to move goods in and out of the UK. An Economic Operator Registration Identification consists of a 12-digit number following the GB prefix. It includes your VAT registration number where your business is VAT registered.
How Do You Get An EORI number?
Depending on whether your business is registered for VAT, your number may be issued automatically or, where this is not the case, your business can apply for one.
When is your EORI number issued automatically?
In August and early September, HMRC sent out Economic Operator Registration Identification numbers automatically to businesses that are registered for VAT and which had not previously applied for an EORI number. If you are VAT registered, check that you have received your number.
How do you apply?
Where your business is not registered for VAT, and it is likely that you will want to move goods in and out of the UK post Brexit, you will need to apply for an EORI number. You can apply for it online. The process is straightforward and should take you less than 10 minutes, with your number being sent out within 5 working days. Unless, HMRC need to undertake additional security checks.
Do You Trade with Ireland?
An EORI number is not needed if goods are only moved between Northern Ireland and Ireland. However, you are required to have one for imports and exports that move directly between Ireland and Great Britain, without going through Northern Ireland.
EU EORI Numbers
If you want to trade with the EU post-Brexit, you will need an Economic Operator Registration Identification number, starting with the country code of the EU country that you wish to trade with. This should be obtained from the Customs authority of the EU country that your business will first trade with, post Brexit.
Stay Up To Date
Brexit is something of a moveable first. The Government will update the guidance to reflect any changes. Check the Gov.uk website and register for email alerts.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Is Work Efficiency In The Power Of Saying “No”?
When it comes to work efficiency, it’s important to be able to say “no” at work without making enemies.
It’s a simple word, but one that far too many of us have trouble saying. Perhaps it’s because you’ve become successful by saying yes to every business opportunity, every request that has come your way, in order to grow your business or develop your career. However, as you progress through your career, you become more successful and new opportunities will inevitably emerge. More people and more projects will vie for your time. For the sake of your work efficiency and productivity, you cannot do everything and this is when it may be necessary to start saying no to things.
Focusing And Work Efficiency Is About Saying No
More than ever, we’re all working harder with less resources, which means that we can often take on too much work. Sometimes saying “yes” to another project when you’re already at full capacity, effectively means that you’re saying no to completing the tasks that you already have to do. Steve Jobs famously said that “focusing is about saying no”. Focusing on what matters, and work efficiency, not just what’s in front of you, is the key to driving the success of your business.
What About Objectives?
Just like most teams in most businesses, you set out your annual objectives at the start of the year, right? And your objectives should align with your overall business goals. And your individual projects and day-to-day tasks should also align with these objectives. So, if a new project or request doesn’t align with your team’s objectives, then it might be best to push back and say “no” to help your work efficiency.
How To Say No
If a senior colleague asks you to do something, a flat “no” may not be an appropriate response. Instead it may be more suitable to say that you don’t have any capacity at the moment, outlining the key projects you’re currently working on. If the new request is to be prioritised, your colleague may suggest that one of your other projects is put on the back burner.
Say No and Manage Your Projects and Time More Effectively
When it comes to managing your time, your career, and your business, over-committing yourself isn’t a sign of success. If you’re struggling to say no, think back to all the times when you agreed to take on something new, and that in turn distracted you from your own priorities. How much time, energy, and stress you might have been saved, if you’d just been able to say no? If you don’t have time to take on more work, and you need to watch your work efficiency, next time simply say, “No, I can’t commit to that due to other priorities.” You don’t need to apologise or over-explain. Just be polite and move on.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Company Car Tax Break – Could you benefit?
Company Car Tax Break: Are you eligible?
You may be aware that the UK government recently announced its intention to exempt newly registered zero-emission company cars from a benefit in kind tax charge, for one year, from April 2020. In effect, this exemption underlines the key role, the company car has to play, in helping the government achieve its zero emissions ambitions. In addition, this company car tax break move is also intended to ensure that company car tax rates are not hiked, as a result of the introduction of the Worldwide Harmonised Light Vehicles Test Procedure (WLTP).
Company Car Tax Break and WLTP – What’s It All About?
With that said, effective April 2020, WLTP will introduce a new CO2 emission-linked benefit in kind calculator to be applied to all new cars. And so, it has been developed using real driving data gathered from around the world. Consequently, the aim is to introduce a universal global test cycle across different world regions. In this way, pollutants, CO2 emissions and fuel consumption values can be compared. This ensuring a level playing field. WLTP is divided into four different average speeds: low, medium, high and extra high. Each speed has a variety of driving phases. As a result, it is considered more representative of everyday driving. Intentionally, the new bands have been made more sensitive to changes in CO2 emissions as a way to nudge companies and their employees to opt for lower emission vehicles in the future.
Why the Change?
Well, the new measure is intended to reduce carbon dioxide (CO2) emissions by encouraging a move towards lower emission vehicles. Whilst we welcome this ambition, the Treasury has acknowledged that the WLTP measure will have significant impact on company car users. Similarly, this was also acknowledged in a recent Treasury document which stated: “Whilst the government’s view is that vehicle tax rates should more closely reflect the environmental impacts of driving, it is important that the transition to WLTP is managed.”
Carefully Managed
So you know, in response to this, and following a period of consultation, the government announced that appropriate percentages of new zero emission models will be as follows:
- Nil in 2020-21;
- 1% in 2021-22;
- 2% rate in 2022-23.
By comparison, the appropriate percentage for most other cars registered from 6 April 2020 will be reduced by the following appropriate percentages:
- 2% in 2020-21;
- 1% in 2021-22;
- 1% in 2021-22;
- 1% in 2022-23.
A small number of company cars with the greatest CO2 emissions (170g/km and over) will continue to attract the maximum appropriate percentage of 37%. The Treasury has acknowledged: “Due to the range of WLTP impacts on CO2 emissions, this approach means some [new] conventionally fuelled cars will be liable to pay an equal amount of company car tax as of today, whilst others will pay more, and a small number of models could pay less.” The government has promised that it will set company car tax rates in advance of the tax year affected by the proposed change. This has normally been the position in recent years. In addition, it will continue to use the current NEDC-based measure for road tax (graduated vehicle excise duty, VED) for 2020/21. However, a public consultation is planned for later this year to establish the best approach to changing the wider road tax system, but avoid hikes in VED for the majority of car users.
Legislation & Company Car Tax
Legislation is to be introduced in the next Finance Bill to amend the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) in order to reflect the changes to the appropriate percentage(s) that will be applied to the list price of the car.
In Summary
So you are aware:
- A zero rate of BIK tax for ‘zero emission vehicles’ from next April for tax year 2020-21, rising to 1% in 2021-22 and 2% in 2022-23;
- A 2% reduction in scale charge from next April for cars registered after 6 April 2020, with a 1% discount in 2021-22;
- A freeze on existing 2020-21 BIK rates for the following two years.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of these payment & tax rules and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Is Off-Payroll Working A Ticking Timebomb?
Private Sector & Off-Payroll Working
While you might have been entertained over the last two years by the IR35-related tribunals involving celebrities such as Lorraine Kelly and Christa Ackroyd, a more significant issue closer to home has been looming large on the tax landscape. HMRC is planning to roll out their public sector version of ‘off-payroll’ working to the private sector. Although this might risk being blown off course by the ongoing Brexit uncertainty, all medium and large private sector businesses employing off-payroll workers (contractors and freelancers) will feel the impact of the new off-payroll working rules when they become mandatory in April 2020. As a signal-of-intent, HMRC published a consultation document on 5 March 2019 aimed at seeking views on how the off-payroll working rules will work. This period of consultation concluded on 28 May 2019. Importantly, it proposed some changes to the existing public sector legislation and promised that any resulting amendments would be reverse-engineered into the 2017 public sector legislation.
Relief for Small Businesses
One piece of good news in response to feedback from AAT and other relevant parties on off-payroll working is that HMRC has excepted operators of ‘small businesses’ from any requirement to implement the proposed rules. HMRC has indicated that the definition of a small business will be in line with the Companies Act definition:
- Annual turnover: less than £10.2m
- Balance sheet total: less than £5.1m
- Number of employees: less than 50
While the definition may be apparent for companies, the definition of ‘small business’ for un-incorporated entities still needs to be adequately defined. Moreover, although the wording in the recent consultation document concerning the core deciding-components appears to be the same, what remains unclear is just how they are to be applied.
You Must Decide
According to the consultation document, it will be your responsibility (the ‘engaging party’) to determine whether or not a contractor is an IR35 deemed worker, based on the terms of the engagement. You will also be expected to set out the reasons for reaching a particular decision, as well as working out the practicalities, how you will be required to share this information with other parties within the supply chain and even directly with the contractor.
Off-Payroll Working and A New Improved CEST
To help you determine a worker’s employment status, HMRC is to revamp its much-criticised Check Employment Status Tool (CEST) tool. As part of the revision exercise, it has promised to consult with interested parties to improve the way that CEST currently works. It will be interesting to see how the department will rise to the challenge of addressing the full range of different concerns about the existing operational shortfalls levelled at CEST. One key area of interest is the Mutuality of Obligation (MOO), and the department’s ability to improve this will be seen by many as a critical test.
Who Is Responsible?
As can be expected, any party in a lengthy supply chain that fails to meet its obligations under the proposed legislation will, at least in the first instance, be held liable by HMRC for any monies due. However, in a move intended to protect the public purpose, HMRC proposes that any liability will transfer back up the supply chain where HMRC finds itself unable to recover the monies due. This may ultimately fall back on you in some instances. In HMRC’s view, this, therefore, requires that the right incentives are in place so that all parties in the supply chain not only comply but are also ensuring the compliance of others further down the line.
Right of Appeal
HMRC is also promising to introduce a statutory appeal process. The absence of any such process in the 2017 public sector legislation left many workers exposed to inappropriate decisions and even the subject of a blanket employment status decision without a right of appeal. This was seen as a severe oversight in AAT’s opinion.
What Action to Take
You should take steps to ensure that you’re aware of this new change and ask yourself how you might be affected. As HMRC has only recently closed its consultation response window, the department will still be sifting through a deluge of response, and the final legislation still resembles shifting sands. Consequently, we are issuing a health warning to the effect that nothing is certain until the underpinning legislation has been passed. Having acknowledged that our advice is built on nothing more robust than the legislative equivalent of these shifting sands, we are outlining the fundaments of what is currently proposed:
- From 6 April 2020, medium and large businesses will need to decide whether the rules apply to an engagement with individuals who work through their own company.
- Where it is determined that the rules do apply, the business, agency, or third party paying the worker’s company will need to deduct income tax and employee NICs and pay employer NICs.
- HMRC has promised to revamp its CEST tool to help businesses determine whether the off-payroll working rules apply.
Finally
We’ll be keeping a close eye on this challenging IR35 issue and closely monitoring future developments, and if there are any updates, we’ll let you know.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of these payment & tax rules and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
How To Reduce Debtor Days And Improve Cash Flow
Reduce your debtor days and improve your cash flow!
Cash flow is king in any business. Yet cash flow is one of the areas your business might be struggling to manage.
Your customers might be reluctant to part with their money, even if it’s to pay for your goods or services. As such, it can take a while for them to pay their invoices. While longer debtor days might not be a big issue for huge international corporations, for the rest of us, it can be a very real source of stress. You need your customers to pay you as quickly as possible so you can continue to run your business, so it’s easy to find yourself working extra hours, chasing up late-paying clients. Here are a few tips to help you reduce your debtor’s days.
When it comes to cash flow: be clear and concise
When creating an invoice, think about your messaging. Is the due date easy to see on the page? Does your invoice state exactly how much payment is required? And have you clearly outlined the various payment options you accept (such as bank transfers, cash, cheque, etc.)? You should clearly set out options such as “pay now”, “pay by instalments” or “pay on the due date”.
Offer incentives to improve your cash flow
Sometimes offering a small discount can motivate your clients to pay you on time. Offering say, 5% off the total bill for clients who pay within 2 weeks of the invoice date, can help your business to get cash in quicker. If you set this type of incentive out at the beginning of your client relationship, it will go down well with clients, as they will see the early payment discount as a “value add”.
More cash flow for you: charge fees for late payment
You can incentivise customers to pay you on time by charging a fee for late payments. If you communicate the terms and conditions around late fees clearly, clients will not be surprised if they are charged for late payment. If you are going to charge clients for late payment, it is usually effective to give some sort of warning. It may be helpful to send clients an email saying that “payment is due in 10 days time, and if it isn’t received, a late payment fee will be applied.” This gives your client an opportunity to respond.
Stay on top of your cash flow and embrace technology
There are a vast array of systems available to help your business track invoices, monitor payments and manage clients who have missed payment deadlines. With an automated accounts receivable system, you can keep track of the status of each invoice, who has paid and what is outstanding. You can set up automatic reminders at crucial moments in the payment cycle, and significantly reduce your administration time.
By implementing the above strategies, you can reduce debtor days in your business and ensure that you are getting cash in as quickly as possible.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Christmas: How To Organise Staff Parties & Gifts Tax free
Christmas Parties and Presents
Did you know that the taxman is not entirely lacking in Christmas spirit? If you are an employer, the tax system features a number of exemptions which enable you to put on a party for staff or to give your employees a seasonal gift, without triggering an unwanted tax liability. However, you should also know that the taxman’s generosity is limited, and the message here is to keep it modest.
Staff Christmas parties
When considering Christmas staff parties, you should take into account that there is no specific exemption, but there is one for annual parties and functions and it is this exemption which provides the opportunity for your staff – and their guests – to enjoy a Christmas party, without being hit with tax charge once the decorations have been packed away. In addition, as with all exemptions, availability is contingent on the associated conditions being met.
Function must be an annual function
And when it comes to tax exemption, you need to be aware that not all functions are equal. The tax exemption only applies to your annual parties and functions. Consequently, if you hold a staff Christmas party every year, you could take advantage of the exemption to keep it tax-free. However, if your Christmas party is not a regular occurrence and you decide to hold a party for staff this year as a one-off, for example to celebrate a successful year, the exemption will not apply and your employees will be taxed on the resulting benefit in kind.
Exempt amount capped at £150 per head
On top of that, the exemption only applies to your annual function if the cost per head is £150 or less including VAT. This is simply the total cost of your function divided by the total number of people attending, including both employees and any guests. If you also provide accommodation or transport, you also need to know that these are taken into account in working out the total cost of your function. VAT is also included, even if this is subsequently recovered where you are VAT-registered. If you only hold one annual function in the tax year, it will be tax and National Insurance free, as long as the cost per head figure is not more than £150.
Exceeding the £150 per head limit
To add to that, the £150 per head figure is an exemption not an allowance, and if the cost of your function is more than £150 per head, the total amount is taxable, not just the excess over £150. This means that if the cost per head is £155 per head, an employee attending alone would be treated as receiving a taxable benefit, with a taxable value of £155. Where an employee attends with a partner, the employee is taxed on their partner’s attendance too – in this case the taxable benefit would be £310. You will also face a Class 1A National Insurance charge where the provision of your party is taxable on employees, as a benefit in kind. So bear in mind that going slightly over the £150 cost per head limit can be expensive – and that there is no tax or employer-only Class 1A National Insurance for you to pay for an annual party where the cost per head is £149; however, the story is very different if it creeps up to £151 per head. The moral here is for you to keep a close eye on your costs.
More than one annual function
Where you hold more than one annual function in the year, the exemption can be allocated in such a way as to minimise the overall tax bill. Your annual functions will all be tax-free, as long as the total cost of all your functions is not more than £150 per head. For example, if you were to hold an annual Christmas party costing £50 per head and a summer barbecue costing £40 per head, both will remain tax free as the total cost per head figure of £90 is less than the permitted £150. If the total cost of all your functions is more than £150, the exemption can cover whole functions in such a way as to give the best result. For example, if you hold three annual functions costing respectively, £70 per head, £60 per head and £40 per head, at first sight the exemption is best applied to the £70 and £60 functions (a total cost of £130 per head). The remaining £20 is lost, as it cannot be set against the £40 per head function – only whole functions can qualify for the exemption. The best result may be different if guests are invited to some of your functions, but not to others. In the last example, if your employees bring a guest to the £40 function, the exemption is best utilised against the £70 and £40 per head events. Leaving the £40 function in charge will mean that your employee suffers a taxable benefit of £80 (£40 for the employee and £40 for their guest); leaving the £60 function in charge reduces the total taxable benefit to £60. There is no substitute for you doing the sums.
Consider a PSA
Another thing, if a taxable benefit arises in respect of your staff Christmas party, either because the function is not an annual function or because the cost per head figure exceeds the £150 exempt limit, you could consider using a PAYE Settlement Agreement (PSA) to settle the tax liability on behalf of your employees, to preserve your goodwill gesture. A PSA is an agreement with the tax inspector under which you pay the tax and associated National Insurance on behalf of your employees. If you want to know more about this, information on using a PSA can be found online.
Deduct the cost in computing profits
The general prohibition on tax deductions for entertainment expenses does not apply to staff entertaining. Consequently, the costs of holding your staff Christmas party can be deducted in computing the employer’s taxable business profits.
Seasonal gifts
At Christmas, you may wish to show your appreciation by making gifts to your staff, customers and suppliers. The rules on gifts can be quite complicated and it is important you understand when a tax charge may arise on the recipient, and what you can deduct when computing its profits.
Staff gifts
It is possible to give your staff small seasonal gifts, without triggering an associated tax charge. Your typical gifts could include a bottle of wine, a small hamper, a box of chocolates and suchlike. The relevant exemption here is the one for trivial benefits, which enables your employees to enjoy small non-cash benefits, costing no more than £50. Unless your employee is a director of a close company, there is no limit on the number of tax-free gifts of £50 and under, that your employee can enjoy each year; for close company directors, there is a £300 annual limit. You should be aware that there are conditions which must be met for the exemption to apply, though. Your gifts must not be in cash or in the form of a cash voucher and it must cost you £50 or less to provide. Further, your gift cannot be reward for services, and there must be no contractual obligation to provide it. Keeping seasonal gifts within the trivial benefits exemption will prevent a tax charge from arising. Detailed guidance on the trivial benefits exemption can be found in HMRC’s Employment Income Manual. Be aware that cash gifts and cash vouchers are liable to PAYE and employer and employee National Insurance. If a tax liability does arise, for example because the cost is more than £50, it will be taxed on your employee, as a benefit in kind, and will need to be reported to HMRC on the employee’s P11D. An employer-only Class 1A National Insurance liability will also arise. Again, you could consider using a PSA, to meet the liability on behalf of your employees. As with staff parties, you can deduct the cost of staff gifts, when computing their taxable profits.
Gifts to third parties
You’re probably familiar with the fact that it’s also traditional at Christmas to give a small gift to key customers and suppliers as a ‘thank you’. However, the rules here are harsh; gifts to third parties are deemed to be entertaining, in respect of which a tax deduction is denied. There is however a workaround – your gift will be tax deductible if the cost does not exceed £50 per person per tax year, and it features a conspicuous advert for the business. In addition, it cannot be food, drink or tobacco (or a voucher exchangeable for food, drink or tobacco). Consequently, to benefit from a deduction for gifts to third parties, go for a business diary or a pen featuring an advert for your business, rather than a bottle of wine.
Keeping it tax-free
To keep your Christmas parties and seasonal gifts tax-free, the trick is for you to keep it small and make use of the available exemptions. Plan ahead and make sure that the cost figures do not creep up.
Lotuswise Chartered Accountants and Business Consultants can support your business with the complexities of these tax and payment rules and help you succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Could You Claim Small Business Rate Relief?
Small business rate relief & business rates
Did you know that business rates are payable on non-domestic properties such as offices, shops and factories. And that the rates are worked out on the rateable value of the property, but there are various reliefs available including small business rate relief. You should also know that the relief is not given automatically and that, as a small business, you could be overpaying, not realising you are entitled to the relief. However, all is not lost; claims for your relief can be made retrospectively, giving rise to a repayment of overpaid business rates.
The business rates calculation
So how do you calculate business rates, we hear you ask? Well, they are worked out by applying the relevant multiplier (set in terms of pence in the pound) to the rateable value of your property. In addition, we know that the most recent valuation took place in 2015, and is used as the basis for all business rate calculations from April 2017 onwards. And you can check the rateable value of your business property online. You should note that the rateable value is based on the annual rent that could be expected to be received if the property were let on a commercial basis.
To add to that, we also know that in England, there is a standard multiplier and a small business multiplier. The standard multiplier, set at 50.4p for 2019/20, applies to business properties with a rateable value of £51,000 or more. The small business multiplier, applying to business properties with a rateable value below £51,000, is set at 49.1p for 2019/20. The multipliers for the City of London are higher – the standard multiplier is 51p and the small business multiplier is 49.7p. In Wales, there is a single multiplier of 52.6. So, for example, the annual business rates for a property with a rateable value of £20,000 outside London would be £9,820 – found by applying the small business multiplier of 49.1p to the rateable value of £20,000.
Small business rate relief
Furthermore, if your business is in England, small business rate relief is available where your business has only one property and the rateable value of that property is less than £15,000. Full relief is available where the rateable value is less than £12,000 – business with a single property which has a rateable value of less than £12,000 pay no business rates. And taper relief is available where the rateable value is between £12,001 and £15,000. The taper reduces the amount of relief from 100% for properties with a rateable value of £12,000 to 0% for properties with a rateable value of £15,000. The percentage reduction is found by applying the following formula: (£15,000 – x) / (£15,000 – £12,000) x 100%.
Small business rate relief example
Let’s say you are a small business operating from offices with a rateable value of £12,750, and your business is based in Norfolk. The business rates applicable to you, before deducting small business relief, are found by applying the small business multiplier of 49.1p to the rateable value of £12,750, giving you a figure of £6260.25. Taper relief is available. The percentage reduction is 75%. Thus, applying small business relief reduces your business rates by 75% to £1,565.06.
Claim the small business rate relief
Unless you make a claim, your business will not benefit from the relief. And your claim must be made to the relevant council, either in writing or online. Once you’ve made your claim, it will be applied to future years. What’s more, claims can be backdated, so check bills since the start of the current system in April 2017. On top of that, you may not realise this but, small business rates relief is not given automatically, and you may be due sizeable repayments. Unless you make that claim, you will continue to overpay. So take action today!
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of business rates, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
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Why File Your Tax Return By 30 December?
File your tax return by 30 December
Your 2018/19 self-assessment tax return must be filed online by midnight on 31 January 2020, if you want to avoid a filing penalty. A later deadline applies where you were not given a notice to file your return until after 31 October 2019 – in this case, the deadline is three months after the date of the notice. However, it can be beneficial to file your tax return by 30 December 2019, rather than waiting until 31 January 2020.
Why file your tax return by 30 December?
Filing your 2018/19 tax return online by 30 December 2019, may mean that any underpayment can be collected, through an adjustment to your tax code. This may be preferable to having to pay it in one instalment by 31 January 2020. Instead collection of the underpayment is spread throughout the following tax year. The option to have tax collected through your tax code is available where:
- Your return is filed online by 30 December 2019, or a paper return was filed by 31 October 2019;
- The underpayment is less than £3,000; and
- You, as a taxpayer, already pay tax under PAYE, for example, because you are an employee or because you receive a company pension.
However, HMRC will not collect an underpayment via an adjustment to a tax code if you, as a taxpayer, do not have sufficient PAYE income to allow for the repayment, or if as a result of coding out the underpayment, you, as a taxpayer, would pay more than 50% of your PAYE income in tax or would pay more than twice as much tax, on your PAYE income as you would do otherwise.
No need to tell HMRC you want an underpayment coded out
Where your tax return is submitted online by 30 December deadline, and the conditions for coding out an underpayment are met, HMRC will automatically adjust your tax code for 2020/21, to collect the underpayment for 2018/19. If you have just been organised in filing your tax return, ahead of time, and do not want an underpayment coded out, you must let HMRC know, by ticking the relevant box on your tax return.
How does the adjustment work?
The underpayment is collected by grossing it up, at your marginal tax rate, and treating it as a deduction from your personal allowances, to which you are entitled. For example, if an employee has a tax underpayment of £300 for 2018/19 relating to, say, dividend income and the taxpayer pays tax at 40%, the relevant adjustment to the tax code is £750 (£750 @ 40% = £300). Assuming the taxpayer has a personal allowance of £12,500 for 2020/21, and no other adjustments to their code, their allowances will be reduced by £750 to £11,750, giving rise to a tax code for 2020/21 of 1175L. The underpayment is collected in equal instalments, over the course of the tax year. Where the employee is paid monthly, the £300 underpayment would be collected in 12 instalments of £25. This may be much less painful than paying it all in one hit.
Action point
Consider whether it would be beneficial to file your tax return by midnight on 30 December 2019, to enable a tax underpayment to be deducted from your pay.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of your tax return, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
5 Things You Should Know About Thought Leadership
5 Things You Should Know About Thought Leadership
1. What Is Thought Leadership?
Thought leadership can be a very effective marketing tool for you, but successfully implementing your thought leadership strategy, is a lot harder that it sounds. As such, a good thought leader is someone who, based on their expertise and perspective of an industry, offers unique guidance, inspires innovation and influences others. And their views on a particular subject are taken to be authoritative.
2. How do you become a professional who applies thought leadership?
To become recognised as a thought leader by your peers, you’re going to have to write, speak, produce content such as video, be interviewed and produce original ideas about the topic you want to specialise in. You need to be passionate about your topic or you are unlikely to succeed in becoming a thought leader in that area. Focus on a niche area – if your topic is too broad or is already covered by lots of other industry experts, you risk getting lost in all the noise.
3. What should be your thought leadership angle?
Once you’ve identified your topic, consider the angle. Are you going to challenge conventional thinking? Have you got an original idea that helps you stand out? Go beyond just collecting and disseminating existing information into usable chunks for your audience. Look at your target market – what challenges do they face in their business or personal lives. Perhaps there is a gap where your firm’s product or service can help? Consider how you could go about educating your target audience in a way that adds value for them. Social media makes it easier than ever to disseminate thought leadership material. Start by producing a blog on LinkedIn. Set yourself a target to update your LinkedIn blog once a month, focussing on expressing and articulating your thoughts on your chosen topic in way that is relevant to your target audience.
4. Thought Leadership research?
Carry out research which relates to your topic, you could perhaps create your own online survey. Use that research to substantiate your point of view. Draw on your own customer data and use this to develop your thinking and report on your results. Over time, you will start to gain some recognition among your target audience. As your reputation builds, expand your range of communication channels to include articles for industry magazines, e-news updates, newsletters and posts on your company website.
5. Thought Leadership speaker!
Make yourself available to speak at industry conferences and be open to responding to enquiries from the media and trade press. The more you put yourself, your content and your views out there, the more your reputation will grow and develop. Make a point of sitting down at least once a year to create, review and update a rolling thought leadership plan. Consider what it is you’re trying to achieve and set out your objectives for your thought leadership to support your overall goals.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Off Payroll Working Rules: This Is What You Need To Know
Off-Payroll Working Rules: Are You Ready?
Whether you are a large or medium-sized organisation, paying workers via personal service companies or agencies, you will need to operate new off-payroll working procedures from 6 April 2020. The new rules will apply to partnerships, LLPs and larger charities, as well as limited companies. If you are classed as “small” under the Companies Act criteria, you will fall outside the new rules. Either way, from 6 April 2020, you will be required to determine whether or not your worker would be categorised as an employee of your organisation, if directly engaged. Your determination will need to be communicated to the agency supplying your worker, so that income tax and national insurance is deducted from any payments. With that in mind, you should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out that determination. You should also give a copy of your determination directly to your worker.
Off-Payroll Working : What If Your Worker Disagrees?
Where your worker disagrees with their employment status determination, they should contact you as the end user organisation straight away, setting out their grounds for their disagreement. You must then provide a response within 45 days of receiving the disagreement. During this time you (as the end user organisation) should continue to apply the rules in line with your original determination.
Radio Presenter Wins IR 35 Personal Service Company Case in Off-Payroll Working Issue
The extension of the “off-payroll” working rules to the private sector, mentioned above is planned for April 2020. But in the meantime, tax tribunal decisions are still being decided against HMRC. In a recent case involving a radio presenter working for TalkSport, it was decided that the presenter would not have been an employee, if directly engaged. A key factor, was that the level of control over the presenter, fell far below the sufficient degree required to demonstrate a contract of service. The accountancy bodies have been lobbying the government to take the judges’decision in this, and the recent case involving Lorraine Kelly, into consideration, when they update their CEST software, used to determine employment status.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of off-payroll working rules & IR35, and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Do You Have Your EORI Number, In Case Of No Deal Brexit?
Economic Operator Registration Identification
As a UK business, you will need an ‘Economic Operator Registration Identification’, EORI number, to trade with the EU, after Brexit.
If There is A ‘No-Deal’ Brexit
In the event that the UK leaves the EU on 31 October 2019 without a deal, your business will need an EORI number, that starts with GB, to move goods in and out of the UK. An Economic Operator Registration Identification consists of a 12-digit number following the GB prefix. It includes your VAT registration number where your business is VAT registered.
How Do You Get An EORI number?
Depending on whether your business is registered for VAT, your number may be issued automatically or, where this is not the case, your business can apply for one.
When is your EORI number issued automatically?
In August and early September, HMRC sent out Economic Operator Registration Identification numbers automatically to businesses that are registered for VAT and which had not previously applied for an EORI number. If you are VAT registered, check that you have received your number.
How do you apply?
Where your business is not registered for VAT, and it is likely that you will want to move goods in and out of the UK post Brexit, you will need to apply for an EORI number. You can apply for it online. The process is straightforward and should take you less than 10 minutes, with your number being sent out within 5 working days. Unless, HMRC need to undertake additional security checks.
Do You Trade with Ireland?
An EORI number is not needed if goods are only moved between Northern Ireland and Ireland. However, you are required to have one for imports and exports that move directly between Ireland and Great Britain, without going through Northern Ireland.
EU EORI Numbers
If you want to trade with the EU post-Brexit, you will need an Economic Operator Registration Identification number, starting with the country code of the EU country that you wish to trade with. This should be obtained from the Customs authority of the EU country that your business will first trade with, post Brexit.
Stay Up To Date
Brexit is something of a moveable first. The Government will update the guidance to reflect any changes. Check the Gov.uk website and register for email alerts.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Is Work Efficiency In The Power Of Saying “No”?
When it comes to work efficiency, it’s important to be able to say “no” at work without making enemies.
It’s a simple word, but one that far too many of us have trouble saying. Perhaps it’s because you’ve become successful by saying yes to every business opportunity, every request that has come your way, in order to grow your business or develop your career. However, as you progress through your career, you become more successful and new opportunities will inevitably emerge. More people and more projects will vie for your time. For the sake of your work efficiency and productivity, you cannot do everything and this is when it may be necessary to start saying no to things.
Focusing And Work Efficiency Is About Saying No
More than ever, we’re all working harder with less resources, which means that we can often take on too much work. Sometimes saying “yes” to another project when you’re already at full capacity, effectively means that you’re saying no to completing the tasks that you already have to do. Steve Jobs famously said that “focusing is about saying no”. Focusing on what matters, and work efficiency, not just what’s in front of you, is the key to driving the success of your business.
What About Objectives?
Just like most teams in most businesses, you set out your annual objectives at the start of the year, right? And your objectives should align with your overall business goals. And your individual projects and day-to-day tasks should also align with these objectives. So, if a new project or request doesn’t align with your team’s objectives, then it might be best to push back and say “no” to help your work efficiency.
How To Say No
If a senior colleague asks you to do something, a flat “no” may not be an appropriate response. Instead it may be more suitable to say that you don’t have any capacity at the moment, outlining the key projects you’re currently working on. If the new request is to be prioritised, your colleague may suggest that one of your other projects is put on the back burner.
Say No and Manage Your Projects and Time More Effectively
When it comes to managing your time, your career, and your business, over-committing yourself isn’t a sign of success. If you’re struggling to say no, think back to all the times when you agreed to take on something new, and that in turn distracted you from your own priorities. How much time, energy, and stress you might have been saved, if you’d just been able to say no? If you don’t have time to take on more work, and you need to watch your work efficiency, next time simply say, “No, I can’t commit to that due to other priorities.” You don’t need to apologise or over-explain. Just be polite and move on.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Company Car Tax Break – Could you benefit?
Company Car Tax Break: Are you eligible?
You may be aware that the UK government recently announced its intention to exempt newly registered zero-emission company cars from a benefit in kind tax charge, for one year, from April 2020. In effect, this exemption underlines the key role, the company car has to play, in helping the government achieve its zero emissions ambitions. In addition, this company car tax break move is also intended to ensure that company car tax rates are not hiked, as a result of the introduction of the Worldwide Harmonised Light Vehicles Test Procedure (WLTP).
Company Car Tax Break and WLTP – What’s It All About?
With that said, effective April 2020, WLTP will introduce a new CO2 emission-linked benefit in kind calculator to be applied to all new cars. And so, it has been developed using real driving data gathered from around the world. Consequently, the aim is to introduce a universal global test cycle across different world regions. In this way, pollutants, CO2 emissions and fuel consumption values can be compared. This ensuring a level playing field. WLTP is divided into four different average speeds: low, medium, high and extra high. Each speed has a variety of driving phases. As a result, it is considered more representative of everyday driving. Intentionally, the new bands have been made more sensitive to changes in CO2 emissions as a way to nudge companies and their employees to opt for lower emission vehicles in the future.
Why the Change?
Well, the new measure is intended to reduce carbon dioxide (CO2) emissions by encouraging a move towards lower emission vehicles. Whilst we welcome this ambition, the Treasury has acknowledged that the WLTP measure will have significant impact on company car users. Similarly, this was also acknowledged in a recent Treasury document which stated: “Whilst the government’s view is that vehicle tax rates should more closely reflect the environmental impacts of driving, it is important that the transition to WLTP is managed.”
Carefully Managed
So you know, in response to this, and following a period of consultation, the government announced that appropriate percentages of new zero emission models will be as follows:
- Nil in 2020-21;
- 1% in 2021-22;
- 2% rate in 2022-23.
By comparison, the appropriate percentage for most other cars registered from 6 April 2020 will be reduced by the following appropriate percentages:
- 2% in 2020-21;
- 1% in 2021-22;
- 1% in 2021-22;
- 1% in 2022-23.
A small number of company cars with the greatest CO2 emissions (170g/km and over) will continue to attract the maximum appropriate percentage of 37%. The Treasury has acknowledged: “Due to the range of WLTP impacts on CO2 emissions, this approach means some [new] conventionally fuelled cars will be liable to pay an equal amount of company car tax as of today, whilst others will pay more, and a small number of models could pay less.” The government has promised that it will set company car tax rates in advance of the tax year affected by the proposed change. This has normally been the position in recent years. In addition, it will continue to use the current NEDC-based measure for road tax (graduated vehicle excise duty, VED) for 2020/21. However, a public consultation is planned for later this year to establish the best approach to changing the wider road tax system, but avoid hikes in VED for the majority of car users.
Legislation & Company Car Tax
Legislation is to be introduced in the next Finance Bill to amend the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) in order to reflect the changes to the appropriate percentage(s) that will be applied to the list price of the car.
In Summary
So you are aware:
- A zero rate of BIK tax for ‘zero emission vehicles’ from next April for tax year 2020-21, rising to 1% in 2021-22 and 2% in 2022-23;
- A 2% reduction in scale charge from next April for cars registered after 6 April 2020, with a 1% discount in 2021-22;
- A freeze on existing 2020-21 BIK rates for the following two years.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of these payment & tax rules and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Is Off-Payroll Working A Ticking Timebomb?
Private Sector & Off-Payroll Working
While you might have been entertained over the last two years by the IR35-related tribunals involving celebrities such as Lorraine Kelly and Christa Ackroyd, a more significant issue closer to home has been looming large on the tax landscape. HMRC is planning to roll out their public sector version of ‘off-payroll’ working to the private sector. Although this might risk being blown off course by the ongoing Brexit uncertainty, all medium and large private sector businesses employing off-payroll workers (contractors and freelancers) will feel the impact of the new off-payroll working rules when they become mandatory in April 2020. As a signal-of-intent, HMRC published a consultation document on 5 March 2019 aimed at seeking views on how the off-payroll working rules will work. This period of consultation concluded on 28 May 2019. Importantly, it proposed some changes to the existing public sector legislation and promised that any resulting amendments would be reverse-engineered into the 2017 public sector legislation.
Relief for Small Businesses
One piece of good news in response to feedback from AAT and other relevant parties on off-payroll working is that HMRC has excepted operators of ‘small businesses’ from any requirement to implement the proposed rules. HMRC has indicated that the definition of a small business will be in line with the Companies Act definition:
- Annual turnover: less than £10.2m
- Balance sheet total: less than £5.1m
- Number of employees: less than 50
While the definition may be apparent for companies, the definition of ‘small business’ for un-incorporated entities still needs to be adequately defined. Moreover, although the wording in the recent consultation document concerning the core deciding-components appears to be the same, what remains unclear is just how they are to be applied.
You Must Decide
According to the consultation document, it will be your responsibility (the ‘engaging party’) to determine whether or not a contractor is an IR35 deemed worker, based on the terms of the engagement. You will also be expected to set out the reasons for reaching a particular decision, as well as working out the practicalities, how you will be required to share this information with other parties within the supply chain and even directly with the contractor.
Off-Payroll Working and A New Improved CEST
To help you determine a worker’s employment status, HMRC is to revamp its much-criticised Check Employment Status Tool (CEST) tool. As part of the revision exercise, it has promised to consult with interested parties to improve the way that CEST currently works. It will be interesting to see how the department will rise to the challenge of addressing the full range of different concerns about the existing operational shortfalls levelled at CEST. One key area of interest is the Mutuality of Obligation (MOO), and the department’s ability to improve this will be seen by many as a critical test.
Who Is Responsible?
As can be expected, any party in a lengthy supply chain that fails to meet its obligations under the proposed legislation will, at least in the first instance, be held liable by HMRC for any monies due. However, in a move intended to protect the public purpose, HMRC proposes that any liability will transfer back up the supply chain where HMRC finds itself unable to recover the monies due. This may ultimately fall back on you in some instances. In HMRC’s view, this, therefore, requires that the right incentives are in place so that all parties in the supply chain not only comply but are also ensuring the compliance of others further down the line.
Right of Appeal
HMRC is also promising to introduce a statutory appeal process. The absence of any such process in the 2017 public sector legislation left many workers exposed to inappropriate decisions and even the subject of a blanket employment status decision without a right of appeal. This was seen as a severe oversight in AAT’s opinion.
What Action to Take
You should take steps to ensure that you’re aware of this new change and ask yourself how you might be affected. As HMRC has only recently closed its consultation response window, the department will still be sifting through a deluge of response, and the final legislation still resembles shifting sands. Consequently, we are issuing a health warning to the effect that nothing is certain until the underpinning legislation has been passed. Having acknowledged that our advice is built on nothing more robust than the legislative equivalent of these shifting sands, we are outlining the fundaments of what is currently proposed:
- From 6 April 2020, medium and large businesses will need to decide whether the rules apply to an engagement with individuals who work through their own company.
- Where it is determined that the rules do apply, the business, agency, or third party paying the worker’s company will need to deduct income tax and employee NICs and pay employer NICs.
- HMRC has promised to revamp its CEST tool to help businesses determine whether the off-payroll working rules apply.
Finally
We’ll be keeping a close eye on this challenging IR35 issue and closely monitoring future developments, and if there are any updates, we’ll let you know.
Lotuswise Chartered Accountants and Business Consultants can help you make sense out of these payment & tax rules and help your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.