My faith in the business/common sense of the government has been restored - they listened to the Treasury Select Committee who advised that it made much more sense to start with the larger businesses and operations and then work down to the smaller businesses.  The common theme in all of the Treasury Select Committee meetings was that this is a very good idea, but it just needs to be introduced correctly.  So, in summary:

From April 2018:  All unincorporated businesses (i.e. self-employed individuals and partnerships), and landlords will be required to do quarterly reporting to HMRC if they have profits chargeable to income tax, and pay Class 4 NIC and the business turnover is GREATER than the VAT threshold.

​From April 2019: All unincorporated businesses (i.e. self-employed individuals and partnerships) and landlords will be required to do quarterly reporting to HMRC if they have profits chargeable to income tax, and pay Class 4 NIC, and the business turnover is LESS than the VAT threshold.

​From April 2019: All businesses that are registered for and pay VAT.

​From April 2010: All businesses that pay corporation tax.

​We will be contacting all of our clients to ensure that they will be able to achieve these, now, realistic, deadlines!! 

​More Spring Budget 2017 news to follow shortly.

If you are self-employed or you are a landlord, then HMRC are planning on making your annual tax returns a thing of the past - or are they?

​Instead of doing any annual self-assessment tax return, with the due date of the 31st January, you will instead be required to do quarterly returns and then another one after that.  So, instead of one return, you will have to do 5!!  Progress for businesses?

No-one surely believes that making the tax return system digital is a bad thing, as that is the way the world is moving, and it brings with it enormous benefits and time-saving potential.  However, the problem with this HMRC idea is, in my opinion, that their starting point is the smaller businesses, and only working up to the larger businesses in 2 years time.  This direction of travel does not appear to be sensible, or to show any business acumen.

​When is this all supposed to happen? - well, apparently it will all be up and running by April 2018, and will therefore come into play for the tax year 2018/19. Beta testing will begin in April 2017.

​Who does this going to apply to? - ​this is the key information which has currently not yet been confirmed by the HMRC.  Current proposals are that this will apply to any businesses, or landlords who have a sales or rental income of at least £10,000 per annum!!  This figure is, in my opinion, ridiculously low, as this is even less than the personal allowance for income tax purposes!  Current thinking, and there are lots of us who agree, is that this should be pushed up to the VAT registration limit of £83,000.

​HMRC will be commenting soon on whether this £10,000 threshold is going to be applied or sensibly changed to something more feasible.  We will keep you posted!

What do I need to do in the meantime?  ​Well, you could possibly consider incorporating your self-employment business, as the new rules only apply to companies from April 2020.  At least by then, the systems will have been tried and tested for at least 2 years on the self-employed businesses.
​Alternatively, you need to contact us and we can talk you through how to improve your own systems in order to make the transition an easy one.

Has your company developed a new curing process for your ham, or a new brewing process for your beer, or have you designed a new operating system on your shop floor?  These are a small example of what could potentially be eligible for Research and Development (R&D) claims. 

The beauty of R&D claims is that if you are already incurring the costs as a company, the mere fact that a claim is successful, means that your company is given a boost in terms of increasing your tax deductions.    For every £100 your company already spends on R&D, you will get a tax deduction of £230 - it really is that simple!

The latest HMRC-produced statistics regarding R&D claims made by UK companies are very encouraging.  The average R&D claim made by Small and Medium Enterprise companies is £55,000!  What does this actually mean?  This could be a £11,000 reduction in the company corporation tax bill if the company was profitable, or it could even mean a possible £7,975 payment from HMRC if the company were loss making!  Both of these scenarios are good options, and certainly something worth pursuing for any company.

​Companies with registered offices in the South West make an average claim of £54,000, so that is almost the same as the national average.  However, only 8% of the total UK R&D claims made are coming from companies based in the South West - this number can surely be improved?

​So, who can claim R&D?  Any company developing new products, services or systems or any company materially improving existing products, services or systems could potentially be able to make a claim for R&D.  If you believe your company could fall into either of these categories, please consider a R&D claim.  Just because your company accounts do not have a ledger account labelled - "R&D", don't assume that it wouldn't qualify for these generous tax benefits.  You may be surprised to know how often R&D is hiding in plain sight as it were.

Are there any deadlines I need to be aware of?  Yes - a company has two years from the end of the financial year within which to make a claim to HMRC.

​Please consider Research and Development at your next monthly management meeting - the benefits could be significant to your business!

HMRC have been consulting recently on ways to improve the take-up and administration of Research and Development claims by companies - in fact the title of their consultation was "Making R&D Easier"!!
Following on from this consultation there will be a number of improvements to the current system and I believe that a key improvement will be a new Advance Assurance facility.  How it will work:

• Companies already undertaking R&D, or more importantly those intending to undertake R&D, will be able to submit an Advance Assurance form in relation to the specific R&D of the business. 
• If the Advance Assurance is successful, it will mean that the first 3, yes 3, years of R&D claims by the company will be processed without any further enquiry into the claims

We are still awaiting the final documentation to appear on the HMRC website, but I would expect it within the next 2 weeks.  This is very good news and will provide tax certainty, at least,  for those companies venturing into the world of R&D for the first time.

The other improvements to come out of the consultation are in the following areas:

1. Treatment of sub-contractors in the R&D tax relief schemes will be reviewed, as this is a notoriously "grey" area.
2. More concise examples to be provided in relation to explaining "appreciable improvement".
3. A commitment from HMRC to assist companies by providing upfront certainty to smaller tech start-up companies investing in software development - another notoriously difficult area to navigate your way through.

So, overall good news for a dark November day.

A cautionary tale for those companies who think that filing their corporation tax return late will only be liable for a £100 late filing penalty.......

When there are two consecutive late filings of corporation tax returns, the third late filing of a return will generate a £500 late filing penalty and not the "standard" £100 late filing penalty. 
These penalties can get even greater should the two consecutive late filings be more than 3 months after the due date.  In this case, the £200 late filing penalty increases to a massive £1,000 penalty.

An important time to ensure that these type of penalties don't creep up on you, is when your company starts out.  Often your first financial year-end is longer than 12 months, so there are automatically two tax returns required for the first financial year-end.  If both of these returns are late, you could potentially be looking at the £500 penalty for your next financial year!    ​

HMRC have published their latest statistics on the Research and Development claims made by companies on CT600's received on or before the 30th June 2015 - and there is lots of good news!!The number of claims made under the SME R&D scheme ,for financial year 2013/14 is up 23% from financial year 2012/13 and comes in at a total of 16,160 claims for the year.  Research and Development credits can come in the form of an enhanced deduction, and therefore a reduction in the corporation tax liability, or they can be a repayable credit should the company be in a loss-making position.  

In the regional analysis of the claims made under the SME scheme the South West accounts for nearly 8% of the claims, compared to 19% of the claims in the South East. This equates to £55million in tax relief being claimed by South West companies!!  So, although our figures are large, it would be good to increase these if we can.

In the industry sector analysis, manufacturing still leads the way accounting for 30% of all of the claims made, but it is now followed very closely, with 27% of all claims, by the information and communication sector.  This is particularly pertinent as it shows that R&D is not only for your "traditional" factory environment-type work, or white-coats discovering new potions, it has firmly moved into the everyday office environment.

All businesses should therefore assess whether they believe that they may be undertaking projects or work which is moving technology or science forwards - the tax reliefs are very generous and well worth a second look!   Please add a line - "Discuss R&D" - to your next management meeting agenda!

As we are all starting to get to grips with the new rules that will apply to all dividends paid on or after the 6th April 2016, it is important to realise that the significant number of small owner-managed companies are going to have to change how they extract funds from their companies.  Continuing as most are doing now - that is, taking a small salary to preserve your entitlement to State Pension, and the balance as dividends - will, in most cases mean that more tax will be payable. 
The rates of tax are as follows:
Basic rate tax payer - currently pays 0% tax on dividends - this will increase to 7.5%
Higher rate tax payer - currently pays 25% tax on dividends - this will increase to  32.5%
Additional rate tax payer - currently pays 30.55% tax on dividends - increasing to  38.1%

It is also important to remember that the £5,000 tax-free allowance for dividends will form part of your personal allowance, and is not in addition to your personal allowance!  HMRC have provided some examples here.

Other people who are likely to face the brunt of these new rules are those whose income is made up of a significant proportion of dividend income.  They too will need to understand the new rates of tax and how this is to affect their tax bills.