Self-employed workers tax cuts scrapped

Self-employed workers tax cuts scrapped

Self-employed workers tax cuts scrapped

Yet another Government U-turn on moves to scrap Class 2 National Insurance for more than 3 million people

Planned self-employed workers tax cuts scrapped by the UK government affecting more than 3 million people; The government was originally due to scrap the current Class 2 NI contribution, paid by self-employed workers with profits of £6,205 or more a year, in April 2018 but last year it was announced that this tax cut for the self-employed was to be delayed for a year, but now this has been permanently shelved by the Chancellor.

It had cited concerns that low-earning self-employed people would pay more to access the state pension, and would therefore make the current tax system more complex to administer.

‘Negative impacts’

The move was set to save millions of self-employed workers about £130 a year. But concerns have been raised that the move could hit more than 300,000 self-employed people earning less than £6,000 a year who were paying the Class 2 NICs voluntarily, in order to access the state pension.

In a written statement, Treasury Minister Robert Jenrick said the change had been intended to simplify the tax system for the self-employed but it had “become clear” that a “significant number” of self-employed people with the lowest profits would have ended up paying more.

Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this Parliament, given the negative impacts it could have on some of the lowest earning in our society, trying to address the concerns would have meant greater complexity to the current tax system, undermining the original objective of the policy. it said.

‘Let down’

Shadow chancellor Mr McDonnell said: This is yet another betrayal of the self-employed. These people are the engine of the economy and have been let down again, few will ever trust Philip Hammond or the Tories again, while yet giant corporations have seen their tax bills slashed.

The Federation of Small Businesses said it would hit more than three million people and would net the Treasury more than £350m annually in the three years to 2021.

The self-employed community has been let down today, missing out on a promise to reduce their tax burden. This further more raises serious questions once again about the government’s commitment to supporting the self-employed.

Class 2 NICs is a regressive levy that indiscriminately hits sole traders and makes life even tougher for those who are hard-up.

VAT

VAT

VAT- registered businesses face the biggest change in decades.

From April 2019, VAT-registered businesses above the current £85,000 VAT turnover threshold must VAT-registered businesses be ready to and be able submit their VAT returns directly to HM Revenue & Customs using compatible software.

The reason for this is the introduction of HMRC’s Making Tax Digital for Business, which despite the odd delay is still on track to give the tax payment system its biggest shake-up in decades.

However, recent research has revealed that 41% of business owners in the UK have never heard about Making Tax Digital (MTD) and of those who had, 76% are finding it difficult to understand how it would affect them.

Will Making Tax Digital affect you?

Many businesses therefore are in the dark that the way they keep their financial records and the software they are currently using will most likely need to change. HMRC is not intending to offer free software, but instead is working with commercial software developers to develop a range of applications that will help businesses to keep their records digitally and integrate with HMRC systems.

Those taxpayers who are already familiar with using desktop software for bookkeeping may have to make an upgrade to remain MTD-compliant. While this means an additional cost and inconvenience initially, the potential benefits of changing to a more user-friendly and efficient software will save you time and money. Download our bite-sized guide here.

How we can help

ABS Accountancy will work with you to ensure that you are fully prepared for Making Tax Digital, and to understand your obligations.  As a small business owner myself, I fully understand what is required to manage your business records digitally.

If you would like us to help you through these changes then call us today on 01298 808497 or contact us online here to arrange a free initial consultation.

Setting up a limited company

Setting up a limited company

Setting up a limited company is likely to involve greater administration and higher costs than if you were a just a humble sole trader.

Essentially, the answer as to whether you should be setting up a limited company concerns personal financial liability. If you’re a sole trader and your business fails, you’re personally liable for all its debts. Potentially, you risk personal bankruptcy if the debt is considerable and you can’t pay it. Setting up a limited company can quite often offer protection against this.

Setting up a limited company

A limited company is a separate legal entity and as such, legally, it’s responsible for its own actions. The finances of private limited companies are entirely separate from those of its owner(s). Private limited companies can have one or more shareholders, but shares cannot be sold publicly (ie on the stock market). Providing you don’t trade recklessly or fraudulently, as a director of a limited company your risk of loss is restricted to money you’ve invested in the company. However, you’ll be liable for bank loans if you provide personal guarantees for that limited company.

To an extent, being a private limited company might make you more credible to potential customers, partners or investors.

To set up a private limited company you need to register with Companies House . This is known as ‘incorporation’. You need:

  • a company name – there are rules on what it can and can’t include
  • an address for the company
  • at least one director
  • at least one shareholder
  • the agreement of all initial shareholders (‘subscribers’) to create the company – known as a ‘memorandum of association’
  • details of the company’s shares and the rights attached to them – known as a ‘statement of capital’
  • written rules about how the company is run – known as ‘articles of association’
  • details of people with significant control over your company, for example anyone with more than 25% shares or voting rights
  • your standard industry classification (SIC code – this number identifies what your company does)

Once the company is registered you’ll receive a ‘Certificate of Incorporation’. This will confirm the company legally exists and shows the companies registration number and the date of its formation.

How do I set up a limited company?

To become a limited company, you register (‘incorporate’) online at Companies House. Alternatively, for a small fee, an accountant, solicitor or agent will do this for you.

What responsibilities do company directors have?

When setting up a limited company you must appoint at least one director, who can also be a shareholder in the limited company. Someone cannot assume this role if they’ve been disqualified from acting as a limited company director by a court of law or the insolvency service; if they’re an undischarged bankrupt; or are younger than 16-years-old.

Private limited companies no longer have to appoint a company secretary. Directors of private limited companies are responsible for notifying Companies House of changes in the structure and management of the company.

Accounts must be filed with Companies House each year ahead of the requested date, otherwise a fine is payable. Unless the company is exempt, accounts must also be audited annually. The company (or its accountants) must inform HM Revenue & Customs, by means of an Confirmation statement, of any taxable income or profits. Corporation Tax is then payable.

Company directors are employees of the company and must therefore pay income tax and Class 1 National Insurance contributions. Profit from limited companies is usually distributed to shareholders via a dividend payment.

Private limited companies

The majority of new companies registered in the UK are companies limited by shares. This is the most popular standard business structure when setting up a limited company, formed with the intention of generating profit for the owners of the business.

This structure is remarkably popular because it allows the sharing of profits amongst the shareholders whilst also offering restricted financial liability. The shareholders are only responsible for company debts up to the value of the shares they hold in the company. So their personal assets will be protected, should the company encounter any financial difficulties.

How we can help

We offer a selection of company formation packages all designed to make setting up a limited company as simple and straightforward as possible.

These range from our essential Digital Package – which provides the bare minimum legal requirements for official company registration – to the All Inclusive, premium package which includes a range of useful extras, such as a goodwill planning, a mail forwarding service, VAT and PAYE registration and free filing of your company’s first Confirmation Statement (previously known as the Confirmation statement). All you need do to set up a limited company is provide some basic information and a few signatures. Further information can found in our informative brochure. Download it here

The General Data Protection Regulations (GDPR)

GDPR

The General Data Protection Regulations (GDPR)

The count down for the introduction GDPR has begun, as these regulations come into force on 25th May 2018, You may have heard or read about GDPR? Are you still unsure about what it is? And what it means for your business, be rest assured you’re not alone. In this article I’ll give you a brief outline on what GDPR actually is and the implications it has on your business.

What is GDPR?

These regulations are the biggest shake up of data protection laws in 20 years; it governs how collection and processing of personal data the EU. It will come into force on 25 May 2018.

Currently in the UK, data protection legislation is currently covered by the Data Protection Act (1998). A new Data Protection Bill has been put to the House of Lords, which will update the UK’s legislation with a new Data Protection Act.

Why have they been introduced?

Since the last Data Protection Act was introduced in 1998, there has been an explosion in digital technology, and with it a proliferation in the use and transmission of personal data.

These new regulations are aimed to make data protection laws fit for the current digital revolution, empowering people to take control of their personal data, and ensure businesses are using any personal data fairly and responsibly.

The only references “personal data” this is information that relates to an identifiable person rather than a business, so GDPR will cover any information you hold for marketing, finance, or HR management purposes. The new regulations cover:

    • Collection and storage of personal data
    • Use of, or processing, or personal data
    • Alteration, disclosure and destruction of personal data

It’s important to note that Brexit will not have an impact on the UK’s implementation of these regulations.

What are the aims of GDPR?

The principle aim in introducing these regulations is to ensure greater harmonisation of data protection regulations across Europe, with a single standard for all countries. Meaning that businesses will have to take greater ownership over the data they collect, reducing risks associated with storing personal data and implementing ways to avoid the misuse of data.

What are the key points I need to know?

GDPR applies to all organisations that store or process EU citizen’s data:

  • The individual’s rights to their data are stronger and more extensive;
  • The rules apply to both physical filing systems and electronic data;
  • GDPR breaches can incur much larger fines – up to 4% of annual turnover or €20 million;
  • Organisations are held accountable for demonstrating compliance, and this needs to be evidenced;
  • Consent to process data must be unambiguous: verifiable, clear and affirmative.

It’s also important to note that organisations will be responsible for self-reporting any breaches within 72 hours.  Any third parties who handle data on your behalf (data processors) will also be liable for breaches going forward.

Your organisation’s responsibilities

Your organisation may be classed as a ‘Data controller’ or a ‘Data Processor’. In some situations, you may be both.

  • A Data Controller is an organisation that collects, keeps or processes data. They dictate why and how data is processed.
  • A Data Processor is a third-party which may process certain data for a specific function e.g. A payroll provider, or IT company. A data processor has new obligations under GDPR and takes on greater liability if they breach regulations.

So what do I do next?

Our first recommendation is to understand what GDPR is really about reading this blog is a good starting point! You need to understand the changes, and how they will impact on your business and we suggest that you provide training to your staff on the implications to them in their role.

With the help off our friends at The Information Commissioners Office, we have prepared an info graphic on the 12 steps on preparing for GDPR. Your can down your copy here.

Don’t forget, the rules come into force on 25 May 2018, so you need to ensure you are compliant by this date.

What is Making Tax Digital (MTD)

Making Tax Digital, making tax digital guide

Making Tax Digital (MTD)

Announced in the spring 2015 Budget, by the then Chancellor George Osbourne, the premise of HMRC’s Making Tax Digital (“MTD”) initiative is to modernise the UK tax system by 2020, through the enhanced use of digital data, making HMRC one of the most efficient tax authority in the world. Making Tax Digital is set to revolutionise the UK tax system and bring an end to self-assessment from April 2020.

HMRC’s main principle aim of Making Tax Digital is to make tax administration more effective, efficient and easier for taxpayers through the implementation of a digitalised tax system by 2020, whilst also reducing its overheads for managing tax affairs.

These changes can also apply to a wide range of taxpayers, including most businesses, self-employed professionals and landlords. This ‘new and improved’ tax system will require the majority of business owners to maintain digital records using compatible software.

What is Making Tax Digital?

Through HMRC the UK Government,is modernising the UK tax system and replacing current tax returns with online digital tax accounts for millions of businesses and individuals alike. A digital tax account brings together each taxpayer’s details in one place, just like an online bank account, so they can view their tax affairs in real-time, update their information, register for new services, see at-a-glance how their tax is calculated, and see a list of payment options.

What is the timeline for Making Tax Digital?

The initial timeline for the implementation of Making Tax Digital was outlined HMRC, initially self assessment tax returns would end on 5 April 2018 and will be replaced by digital tax accounts. The initial timeline of implementation:

  • April 2018 – Making Tax Digital Go Live – Income Tax
  • April 2019 – Go Live – VAT
  • April 2020 – Go Live – Other Taxes

What are the reporting requirements?

On Friday 14th July 2017, HMRC issued a revised timetable for the implementation of Making Tax Digital, The introduction will begin in April 2019, HMRC expects only VAT registered businesses to keep digital records and only for the purposes of VAT; other businesses will no be asked to maintain digital records or update HMRC quarterly for other taxes until 2020.

This news means that there will be at least another a years’ delay for everyone, since Making Tax Digital was originally due to start to take affect in April for business with turnover over £85,000.

This new timetable will allow sufficient time for the software industry to test and implementation of their systems given the scope of the changes that are been mandated by HMRC.

Will my accountant still be able to report on my behalf?

Under the new regime, accounts/agents will have “Agent Access”. Which will enable taxpayers to authorise their accountants or agents to access their digital tax account; who will then be able to submit the quarterly reporting on behalf of their clients.

Will HMRC be providing Making Tax Digital (MTD) software?

HMRC will not be providing software for Making Tax Digital. However HMRC is working in consultation with software developers on what software is required and how this requirement best be met.

Here at ABS Accountancy, we’re keeping an close eye out for any further developments from the Government in regarding to Making Tax Digital.

We expect these to be included in the for coming Finance Bill, currently scheduled for publication sometime this next month, we also expect some sort of announcement in the Chancellors next budget, currently scheduled for 22nd November 2017.

Our team of tax experts, have written a bite-sized guide for business, download your copy here

Growing your business

Growing your business

Setting your sights on growing your business

Growing your business requires thought and plenty of meticulous planning. It’s very important that you take the time to plan and think for the future rather than just reacting to the first opportunity. Be objective and consider all the ‘what if’ scenarios. This will help you to spot all the opportunities and risks.

The following tips should help you along the route to growing your business:

Create a business plan

Firstly, spend time to define and map out your business plan, ideally this should be done on one piece of A4 paper. Create a simple vision of what your business model looks like and create an actionable, achievable business plan. Use a mind map or family tree to define the vision looking at the audience, departments and sales channels. You should be able to describe your entire business in one sentence.

Consider:

  1. Customers – who is your ideal customer? Where do they live? What do they read? Consider their demographics, ideals and interests.
  2. Sales channels – how are you going to sell to your customers? What are the requirements/effects of that sales channel? Take a moment to map out how specific sales channels operate.
  3. What are the USP’s of your business? – use the classic “4 Ps” of marketing to define your brand, production process and provenance. What is the fourth p? Why do your customers buy from you specifically?

Recruit on attitude above all

Define the people you need within the business to be able to deliver your brand to your customers. Employ people based on attitude and teach the necessary skill set.

Remember that everyone, including non-customer facing staff, can have a huge impact on the reputation of your brand, and the future of your business.

It is essential to recruit your team with a positive mind-set and a can-do attitude if you are to realise your goals, on growing your business. What you don’t know should not hold you or your team back – don’t be afraid to ask for help.

There are no such thing as stupid questions; just stupid answers. Find someone who knows more than you, and listen to their advice.

You and your team needs to buy into points 1-3 within your one-page business plan and be able to pull together to deliver a positive result for sales growth and target achievement.

The infrastructure challenges

Make sure your physical surroundings and equipment – offices, communication tools (land and mobile), technology– are fit for purpose. Is your internet speeds adequate? It’s important to take time in assessing the requirements for your business. If communication is poor, what are the barriers? Is your technology holding you back? Futureproof your business and invest for the future, not for the right now.

Do the paperwork

Produce a detailed sales forecast for the next 3-5 years by sales channel with associated costs of raw materials, infrastructure and people. By doing this, you will better understand the resources needed to deliver the growth plan and also see which opportunities are the easiest to realise.

Producing a forecast allows you to focus on the easy wins rather than trying to win all the sales opportunities or solve all the battles on day one. By putting the legwork into the paperwork. This will also help you to identify the core risks and avoid the pitfalls accordingly.

Stress test your business plan

Ensure you have enough cash and resources in the business to deliver on points above. Stress test your business plan and cashflow forecasts on a monthly basis to avoid the business running out of money before it achieves its growth and profit targets. 

In order to set your sights on growing your business, it’s important to have/raise sufficient funds. In order to raise funds, you’ll need a great idea, great people and above all a credible plan which investors will want to buy into and provide the necessary cash resources for you and your team to deliver on that plan. Remember the mantra – idea, people, plan, cash.

Financial Management

Financial Management

The day-to-day financial management is one of the biggest concerns that many small business owners will commonly face, according to a survey of more than 1,000 entrepreneurs carried out by software developer, Reckon.

20% of those surveyed admitted that financial management kept them up at night, as they continually struggle to stay abreast of the figures within their businesses.

Though financial management isn’t only an issue that’s solely felt by many start-ups. 29% of those with a turnover greater than £10m admit that they have had similar worries either now or have had in the past.

This survey also highlights the need for greater financial support and education within the small medium business community.

One-in-ten of those surveyed believe that there is not enough financial planning and advice available for small firms and business start-ups. The same number of respondents would consider outsourcing their day-to-day financial management if money was no object.

Mark Woolley, Commercial Director, Reckon, believes the UK government should put financial management firmly on the agenda for the new Small Business Commissioner.

“It is worrying that so many businesses are concerned about financial management, as it is an issue that can impact their suppliers, partners and our economy,” said Woolley.

Financial management is one of the fundamental keys to success for any business, regardless of size.

History has shown that companies with high sales revenue but with poor financial management can still fail.

“Whilst there are some good resources out there already, clearly there still appears that a gap still needs to be filled and it needs to be fixed quickly! We’d urge any new and existing businesses alike to seek good advice on the easiest and quickest ways to take control and stay on top of day-to-day finances of their businesses. Says Tom Lowe Director of ABS Accountancy.

However, with ABS Accountancy to hand, there’s no need for start-ups to fear the financial management of there businesses. From day one, you can count on our expert accountants to quickly assess your cash flow position and recommend the most efficient system that would allow you to spend more time doing what you do best – running your business. So why not get in touch with us today to relieve that burden?

Auto Enrolment Penalties

auto enrolment penalties

Auto enrolment penalties can hit employers with fines in excess of £10,000.

To avoid Auto enrolment penalties, there are several duties employers must undertake to avoid such penalties. Even if there are no eligible job holders, certain steps are needed to be followed.

The responsibility of auto enrolment rests with the individual employer even if you outsource your payroll. If you fail to comply the Pensions Regulator (TPR) will act.

If an employer chooses to ignore their automatic enrolment duties. The TPR will take enforcement action with auto enrolment penalties, such as statutory notices. As an example for a first time breach in the areas of non-compliance of duties or unpaid contributions or not registering with the Regulator. Continued non-compliance may lead to court action.

In genuine circumstances, where the employer genuinely did not understand their duties or due to unforeseen circumstances have not been able to comply, TPR will work with the employer to ensure compliance. Such action would normally start with statutory notices, this will then be followed by financial penalty notices and continued non-compliance may lead to court action. At the end of the day it is in the TPRs best interest to work with employers to make sure they understand their employer duties.

The Pensions Regulator they are trying to focus on a “carrot approach” (guidance, education and support) rather than imposing the “stick approach” to Auto enrolment penalties).  Basically they are looking to help companies who are trying to achieve compliance, but they have significant powers to take action against employers who wilfully fail to carry out their duties. As an example this could be for first time breach in the areas of non-compliance of duties or unpaid contributions or not registering with the Regulator.

Enforcement Action

The Pensions Regulator will investigate willful and non-willful non-compliance. They are within their rights to carry out inspections and request certain information from employers. TPR will enforce non-compliance in a number of ways:

  • Informal action;
  • Statutory notice;
  • Penalty notice;
  • Escalating penalty notice;
  •  Civil penalty notice;
  • Prohibited recruitment conduct penalty notice.

Receiving Auto Enrolment Penalties

Firstly, it is very important to pay the penalty by the date specified on the notice, as failure to pay will result in the regulator bringing more formal proceedings including legal action through the courts if need be, which could result in a criminal prosecution. Employers can pay their penalties using TPR’s online payment service.

Avoid Auto Enrolment Penalties & a criminal prosecution

Our first tip would be to ensure that you are full understand and prepared for your automatic enrolment duties. It would be advisable to check that your current payroll system is compatible with your chosen pension scheme.

Still unsure of your responsibilities under Auto Enrolment, why not give our team a call or contact us, for free plan speaking and initial advice.

Request your free Review Meeting (either online or at our office) by using our contact page, and someone will respond within 1 working day.

The Register of Companies

Register of Companies

The Register of Companies Fraud

The National Fraud Intelligence Bureau (NFIB) is alerting people to a new scam where businesses are contacted from The Register of Companies soon after registering with Companies House requesting them to pay a “fee”.

The letter from Register of Companies or Register of Companies and Businesses purports to be linked to Companies House claiming the recipient is required to “confirm their registration”.

The Company request a fee of £190 to register and publicise the new company information. Their website states that the fee is for entry into the register which operates in UK – giving you the opportunity to use the websites services.

The letter being delivered states “lack of payment will result in lack of your company`s entry in regist.co.uk”. The implication is that this is required as part of the Companies Registration, when that is not the case. The letter then goes on to say that “lack of payment will result in lack of your company’s entry in regist.co.uk or even e-public.co.uk”, which suggests that it is a required part of company registration. When it isn’t

As you may guessed, the Register of Companies and Businesses is nothing to do with Companies House.

The bottom line is – if you receive such a letter from the Register of Companies, do not respond, there is no legal requirement to and you will be paying £190 for nothing.

We urge that you Protect yourself from this fraud Never respond to any such communication;

  • Never respond to any such communication
  • Any unsolicited contact followed by a request for an Do not pay
  • Never disclose your bank details.

Keep yourself safe

Avoiding such scams is fairly straight forward but you’ve got be careful & vigilant. As long as you don’t respond to suspicious communications, especially ones that ask for a fee, you should be fine. And it goes without saying that you should never give away your bank details unless you can verify that the recipient is legitimate.

If your unlucky enough to receive a letter of similar nature, contact Contact Action Fraud on 0300 123 20 40 or use its online reporting tool to flag any scams.

Gift Aid Rules 2016 outlined by Buxton accountants

Gift Aid Rules

Gift Aid rules governing donor benefits

Gift Aid rules which govern the benefits that charitable donors can receive when making a eligible donation have been consulted upon by The Treasury. Under current Gift Aid rules, donations up to £100, the benefit value can equate to a total of 25% of the donation; for donations between £100 and £1,000, the value of benefits is capped at £25, while for donations over £1,000, the benefit value can equate to a total of 5% of the donation, to the annual maximum value of £2,500.

The consultation, looked into whether calculating the ‘net’ value of donations on which gift aid can be claimed by deducting the cost of providing donor benefits from a charity’s gross donation receipts would achieve genuine simplification of the Gift aid rules? Other alternatives, such as removing the relevant value test and aggregate value test and operating the Gift Aid rules donor benefits through an extension of the split payment approach allowed under an extra statutory concession.

The ‘net’ approach, can often be seen as being complex to operate. It can also be inequitable to offset the full cost of all benefits, including those provided to donors of funds ineligible for Gift Aid. Removing the monetary thresholds altogether and replacing them with one of the alternatives outlined would mitigate the administrative burden on charities.

However there is little agreement on the question of reducing the number of monetary thresholds. There is significant support for moving to a percentage-based threshold system, with nearly three-quarters of respondents in favour, but these responses were often caveated (most usually in relation to the level at which the threshold should be set and the method used. A significant majority of respondents felt that a disregard for low value benefits (below £3) would be a simplification.

An anomaly in the current system of thresholds that allows twice the value of benefits for an increase in the donation made of just £1 (where the donation increases from £1,000 to £1,001).

Further consultation

The current maximum annual benefit value of £2,500 would continue to apply in all cases.

The current 25% limit on benefits for donations up to £100 would also remain unchanged.  For donations over £100, the upper limit for the £25 threshold would be reduced from £1,000 to £499 and the 5% threshold would apply to donations of £500 and over.

The government would be likely to set the single threshold at a rate in the region of 10% if accompanied by a disregard for low value benefits or in the region of 15% without a disregard. It also believes there could be significant merit in this approach.

Therefore, proposing an alternative which would involve calculating the donor benefits allowed for a single donation using two different percentage rates, i.e. applying one percentage rate to the first element of a donation and a different rate to any amount exceeding this. The total of these would be the permitted limit to the value of donor benefits.

Upon this basis, the government would be likely to set rates in the region of 25% of the first £100 of a donation, plus in the region of 2% to 4% of any additional amount donated if a disregard operated alongside, or 5% of any additional amount donated if not accompanied by a disregard.

For more advice and detail regarding gift aid rules in 2016, we welcome you to contact our Buxton accountants, Derbyshire