tax – Severn Valley Business Group
 

Tag: tax

Thoughts on investments and stock markets

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Please find the latest quarterly newsletter from Redmayne-Bentley that might be of interest.  Areas that are covered within the newsletter include:

  • The great unwind – US interest rates v US equities.
  • Top Trades.
  • Do you need help with your investments?
  • The future for oil.
  • The early bird catches the worm.
  • Important information for clients.
  • FTSE Reshuffle
  • Hot property.

I would be very happy to answer any questions that you might have arising from reading the newsletter.

The Quarterly – Summer 2017

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Key changes to Making Tax Digital scheme announced

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HMRC has announced its revised plans for its Making Tax Digital scheme affecting businesses – and it seems to have listened to common sense.

MTD, as originally announced, came in for a barrage of criticism from accountants, tax experts, businesses, and politicians from all sides. It would have seen everyone turning over more than £10,000 forced to keep digital records and file quarterly returns, beginning next April.

The new announcement sees changes to which businesses are affected, when, and even which taxes it relates to. The key points of the revised scheme are:

  • MTD will only apply to VAT until at least 2020
  • Businesses below the VAT threshold (currently £85,000) will be able to opt-in if they want but it won’t be compulsory – yet

The scheme will begin in April 2019. From that date, businesses over the annual registration threshold will have to keep digital records for VAT purposes, providing their VAT information to HMRC through MTD software.

MTD for VAT will be piloted using small-scale private testing towards the end of this year, with a larger live pilot next spring.

The Treasury says businesses with a turnover below the VAT threshold can choose to use MTD, and opt in for other taxes, ‘benefitting from a streamlined, digital experience’. It is not clear when this will be from.

It also says it will not extend MTD to other taxes until the scheme has been shown to be working well, or April 2020 at the earliest.

In my previous blogs on MTD, while arguing against the timescale and requirements, I pointed out that having up-to-date information really benefits businesses and day-to-day decision making.

So while many business owners will be happy to have dodged a bullet for now under these revised MTD rollout plans, the Treasury remains committed to a digital tax future. As it says, millions of businesses are already banking, paying bills, and interacting online. Digitising routine business tasks such as record keeping is the next step and is one many businesses have already taken.

For help and advice on record keeping, and how to get the most out of your accounts, contact us here at Altus.

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VAT changes are no April Fool’s joke

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matt-le-1127061st April sees what could be a significant change to the flat rate VAT scheme. It’s targeting what are being termed ‘limited cost traders’ – businesses where purchases of ‘goods’ are low. These are likely to be sole director/employee businesses, and in particular contractors providing services.

Small businesses can currently benefit from the ability to base their VAT liability, and therefore the amount of VAT they reclaim on purchases, on a fixed percentage depending on the nature of their business.

For many very small businesses this has meant a really quick and simple way to handle VAT and has seen some paying over less VAT than would have been the case under standard VAT accounting.

Changes were first mooted in the Autumn Statement, and we have been waiting to see the details before knowing how it would affect businesses. These details were finally revealed at the end of February.

The flat rate scheme remains in place but from 1st April a new higher rate (16.5%) is applicable to any business that is deemed to be a ‘limited cost trader’. The impact of this will be that for many the VAT flat rate scheme will no longer be beneficial.

You will be classed as a limited cost trader unless you have ‘goods’ in each VAT quarter of more than 2% of turnover (both calculated including VAT). You will also have to check each and every quarter whether this applies.

Goods are being defined as ‘moveable items or materials exclusively used in your business’. Critically for suppliers of services they do not include travel expenses, fuel, vehicle costs, telephone, rent, accountancy fees, training, memberships and also office equipment, computers and phones. This is not an exhaustive list, but you get the picture.

Clearly this excludes the vast majority of costs which many service businesses incur.

The options for a business caught by this change are:

1.      Continue with the flat rate scheme and apply the new higher percentage, which may not be beneficial

2.      If you are below the £83k VAT registration threshold then you could deregister for VAT

3.      Change over to standard accounting or cash accounting methods

The best option will vary on a business by business basis. If you are, or think you may be, affected by these changes, then please do get in touch, and we will be happy to talk it through with you.

 

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Employed or self-employed: that is the question

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Within the space of a couple of weeks I have been asked by three different clients if I could explain what defines a person as being self-employed.

There was a time not so long ago that I would have confidently answered, quoting the ‘7 badges of trade’ definition.

These days it’s a lot less clear, and I’m not the only one who thinks so. High profile court rulings over plumbers from Pimlico and Uber taxi drivers have left everyone advising on employment status and tax implications scratching their heads. The ‘gig economy’, zero hours contracts and the like have greatly muddied the waters and the result will likely affect anyone not on a straightforward employment contract.

So are the days of the self-employed numbered?

Matthew Taylor, who is heading the Government’s enquiry into the way millions of people work, says there is evidence some firms are using self-employment rules to avoid paying tax. What, really? You have to wonder how in touch they are with the real world if they’ve only just woken up to this.

The Treasury’s take has undoubtedly fallen with the rise in ‘self-employment’, the problem being:

·        The worker pays less tax – the Institute of Fiscal Studies says employed people pay an effective tax rate of 31% compared to 22% for the self employed, who pay less NI and can also offset certain expenses (although I don’t know where they have got these figures from)

·        Businesses make no NI contributions on those classed as self-employed

Chancellor Philip Hammond is understandably concerned about the issue and is widely expected to announce tax reforms, balancing the treatment of employed and self-employed people. This could happen as early as the Budget on 8 March. We have already seen a HMRC drive against personal service companies, such as those that are commonplace in the NHS, public services and media. The gig economy and growing number of self-employed must be in their sights.

On the flipside, it has created more flexibility in the economy which some will argue is a good thing. Small businesses in particular see the costs and risks of employing someone as too high, with a fear that they will not be able to get rid of them if the work dries up, they can’t afford them – or they are just not up to the job. The ability to use someone when you need them, with no ongoing commitment (on either side) is far more appealing.

Until we have more clarity – and that needs to come now from the taxman rather than judges – then it is sensible to stick to the traditional measures of employment when deciding whether you, or someone working for you, is employed or not. We are happy to discuss your particular situation in more depth; just click on the link http://bit.ly/2lcING5

 

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