Archive for November, 2017

Merry Christmas for the Tax Man

Wednesday, November 29th, 2017

Countdown to the Christmas party season has already begun and for some companies, particularly those who have had a good year, it’s often a time to give a bit back and say ‘thank you’ to staff, clients or customers by throwing a great party, buying gifts or putting on a special event.

And even the tax man loves Christmas, too.

Christmas Parties

When the directors of a company decide to hold a Christmas party, the cost of it comes under the ‘business entertainment rules’.  Entertainment naturally involves eating, drinking and forming or maintaining contacts.  If your Christmas party is for employees only, then VAT on the costs of the party can be recovered, subject to normal exemption rules – no matter how lavish it is.

If the directors attend the party with their staff, then VAT on the cost is still recoverable.

But if the directors are shareholders in the company, and have a separate party for themselves, then VAT would not be recoverable because it is assumed that there would be no business purpose. HMRC consider that the directors don’t need any more rewards or motivation because they are already receiving a higher salary and profit sharing perks.

Further, if guests who are not employees attend the party, then the VAT would need to be apportioned between employees and non-employees as there is no allowance for VAT for entertaining non-employees.

Christmas Presents

VAT is claimable on gifts whether they are for employees or clients.  There is no need to account for tax on the cost of the goods however, if they are given as gifts as long as the total VAT exclusive cost of business gifts to the same person in any one year, does not exceed £50.

If you’re unsure which tax category your office Christmas celebrations fall into, contact rob@treeaccountancy.co.uk for an informal chat.  Merry Christmas!

What does the Autumn 2017 Budget mean for you

Thursday, November 23rd, 2017

With immediate effect: new announcement

– From 22 November 2017, Stamp Duty Land Tax (SDLT) abolished for first time buyers on homes costing up to £300,000; no SDLT on first £300,000 of first time buyer’s purchase of homes up to £500,000.

– From 29 November 2017, Marriage Allowance can be claimed to transfer the benefit of 10% of the  personal allowance after the transferring spouse has died.

– For tax year 2017/18, unincorporated property business landlords will have the option to use simpler fixed rate deductions for miles travelled by car, motorcycle or goods vehicle for business journeys.

– From 6 April 2017, anti-avoidance measures will tackle ‘disguised remuneration’ schemes used by closely controlled companies to remunerate employees who have a material interest.

From 1 January 2018: new announcements

– Indexation allowance, which gives companies relief for the effect of inflation on capital gains, will be frozen at January 2018.

– The rate of the Research and Development Expenditure Credit increases from 11% to 12% with effect from 1 January 2018.

From April 2018: new announcements

– Tax-free personal allowance rises from £11,500 to £11,850; threshold for 40% tax rises from £45,000 to £46,350. Rates and bands for Scottish taxpayers are still to be confirmed by the Scottish Parliament.

– Employees will not be charged income tax on benefit of charging an electric car at work.

– Supplement of 3% in calculating taxable employee benefit of a diesel company car will increase to 4%.

– Employees with SAYE-related share option schemes will be able to take a 12-month break from saving, up from 6 months at the moment, while on maternity or paternity leave.

– Abolition of Class 2 National Insurance and reform of Class 4 NIC for self-employed deferred by a year to April 2019 in order to assess impact on contributory benefits.

– Freezing of VAT registration threshold at £85,000 for two years instead of normal £2,000 increase, but speculation about possible reduction in threshold was unfounded.

– ISA investment limit for 2018/19 unchanged at £20,000; Junior ISA limit rises in line with inflation to £4,260.

– Lifetime Allowance for tax-advantaged pension funds rises from £1m to £1,030,000.

– Increase in Enterprise Investment Scheme investment limit from £1m to £2m, provided any amount over £1m is invested in one or more knowledge-intensive companies.

– Capital Gains Tax annual exempt amount rises from £11,300 to £11,700.

– Annual Tax on Enveloped Dwellings to rise by 3% in line with inflation.

From April 2018: confirmation of previous announcements

– ‘Making Tax Digital’ reforms for income tax reporting will not now be introduced until 2020 at the earliest; VAT-registered traders to operate ‘Making Tax Digital for VAT’ from April 2019.

– Class 4 National Insurance Contributions increases proposed in March 2017 will not take effect.

– Dividend Allowance, introduced at £5,000 for tax year 2016/17, reduced to £2,000 for 2018/19.

Other significant announcements

– CGT charge for non-resident taxpayers extended to cover non-residential as well as residential property in the UK with effect from 1 April 2019 (companies) and 6 April 2019 (individuals).

– Allocation of £155m in extra resources to HMRC to fund action on the hidden economy, marketed tax avoidance schemes, enablers of tax fraud, non-compliance and collection of debts 9 months overdue. As always, if you need further advice on any of the changes above, please contact kate@treeaccountancy.co.uk

How to Recruit and Retain the Top Talent in your Marketplace

Thursday, November 16th, 2017

Enterprise Management Incentives are a HMRC approved way of receiving an option to a share in a business at a future date – for example, the date is the sooner of an event such as a sale or perhaps a 10-year anniversary.

This can be an excellent way of recruiting and retaining key staff and incentivising them towards common goals and profit.  Anyone who is ambitious and good at their job will always be searching for a role with better career prospects and higher financial rewards.  And if they leave, the cost to replace them can damage your business financially.

But with an EMI, you can often avoid losing key staff.

What is an EMI?

EMI’s are share schemes offering attractive tax breaks for both the employer and the employee if your company has assets of £30 million or less.  And if the shares in your business are purchased by the employee for at least their market value during the period of the share option, there will be NO income tax or national insurance to pay

Advantages

EMI’s enable smaller businesses to offer employees an equity stake in the business rather than paying high salaries and bonuses.

The employee feels part of the company and can benefit from receiving substantial gains should the company grow.  This incentivises them to help build a successful business.

Your company can grant shares up to the value of £250,000 over a 3-year period – with no immediate income tax or national insurance payments due.

And a capital gains tax (currently 10%) will only arise when the shares are sold.  The income tax and NI charge for providing a similar cash reward would be almost 50%.

Provided the total value of shares issued under an EMI is less than £3 million, there is no limit to the number of shares which can be issued.  Or the number of employees who can receive them.  So, it’s an excellent route to retain key staff.

 Corporate tax deduction

It gets better.  Your company will receive a Corporation Tax deduction on an EMI plan, provided the following conditions are met:

– your business has a turnover of less than £30 million.

– the employee works a minimum of 25 hours a week, or

– if less, at least 75% of the employee’s working time

– the employee cannot own directly or indirectly more than 30% of the ordinary share capital of the company.

– the shares must be exercisable within 10 years.

 Excluded activities

A little bad news.  If your company works in the following sectors, you won’t be able to offer EMI’s:

– banking

– farming

– property development

– provision of legal services

– shipbuilding

And finally, when option shares are sold, the employee will be liable for capital gains tax (CGT), which is currently at the entrepreneur’s relief rate of 10% rather than income tax.  To make it more attractive though, the employee can also use their annual CGT exemption.

If you would like to discuss EMI’s further with one of our accountancy experts, please contact kate@treeaccountancy.co.uk

Reap the Rewards with R&D Tax Credits

Wednesday, November 15th, 2017

Background

Since 2000, any businesses which spend money on the research and development of new products, processes and services have been rewarded for their efforts with R&D Tax Credits from HMRC.  But many SME’s are not claiming these R&D Tax Credits because they simply don’t know where to begin.

At Tree Accountancy, we want to help you and your business grow.

We have expert R&D accountancy experience and specialist R&D advisors in place to help you make the most of R&D tax relief.  R&D work is time-consuming and expensive.  But get it right, and the rewards can be vast.

Amount of relief

Most SME’s should fall within the small company R&D scheme. This, for example, provides an additional 130% tax relief for qualifying expenditure. So, for each £100 of R&D spend the company’s profits will be reduced by a further £130, a £230 deduction in total.

If an R&D loss is converted into a tax credit, a refund of 14.5% of the loss is available, so for example, a loss of £100 creates a £14.50 tax credit refund.  This can soon mount up.

What R&D costs can I claim for?

To qualify, your business must be carrying out a project which seeks advances in science or technology.  The qualifying categories of expenditure include:

– Staff expenditure (including gross salary, employers NIC and pension contributions)

– Sub-contractor R&D costs (generally 65% of the cost can be claimed)

– Consumable items (power, fuel, water etc) used directly in R&D work

– Computer software employed directly in R&D

And did you know that you can also include R&D work undertaken on behalf of your clients, too?

Lastly, if your business does not qualify for the small company R&D scheme, it may still qualify under the larger scheme.

To be connected to the right Tree R&D accountancy expert, please contact Kate@treeaccountancy.co.uk

Straight-talking start-up advice

Tuesday, November 14th, 2017

Starting a new business can be a very exciting time.  But before you jump in, take some time to ask yourself some simple questions:

  1. Why am I doing this?
  2. How much money will I need?
  3. Where will I get that money from?
  4. Who will buy from me?
  5. Who are my competitors?

Once you know the answers to these questions, you have a potential business.  If you don’t, then do some further planning and research as there will undoubtedly be outside influences to overcome to be successful – make sure your business idea is crystal clear.

Barriers to growth

Some of the most common barriers to growing your business are:

  1. Proving your products and services work and that there is a real demand for them
  2. Proving a sustainable business model that allows your products and services to evolve
  3. Knowing whether your business is scalable
  4. Lack of awareness of your marketplace

Produce a plan

Next, you’ll need a strong business plan.  This is vital and should clearly show the steps required to be successful.

Research shows that 67% of companies that fail do not have a business plan, but those that do are 12% more profitable.

And right from the start, you should ask yourself: what’s my endgame? This is something any investors in your business will particularly want to know.  For example, do you really want to run your business forever? Or might you want to one day sell it, or maybe grow it big enough to float your business on the Stock Exchange.  What would you want to walk away with and what comes next?

Your business plan should then focus on your value proposition – what service or product will make your business attractive to customers?

And what exactly is required to make it happen? Where will your market be and who’s your competition?

A vital part of your business plan is to include a financial model which is driven by key performance indicators (KPI’s).  KPI’s can show the initial investment required, breakeven points and how profit will increase with further growth, and when further investment or support is required.  There should also be some milestones at Years 1, 3 and 5 too.

Consider too, how many staff you will need with a clear action plan for who has responsibility for what, and the expected timescales involved so that there is full team buy in.

Anchor Clients

Anchor clients are the cornerstone clients for your business and they normally provide as much support to you as you do to them, trialling new products and services and offering healthy feedback.  The income they generate is also useful!

Implement reporting

At Tree Accountancy, we support our clients in developing and implementing important tools used in the financial reporting process, and your investors will also expect to see (and be reassured by) professional accounting expertise in place.

We can help you regularly review your position against plans made and financial targets put in place to keep your business on track.

We also ensure HMRC and Companies House registration compliance which can be complicated and time-consuming.

To achieve robust financial reporting, we offer a complete and expert accountancy service designed to expand with your business.

We even take into consideration future enhancements such as ‘Making Tax Digital’ – a whole other area of accountancy expertise which will affect your business before too long.

For further information on our services or to talk to one of our experts, please email kate@treeaccountancy.co.uk

How To Pay Less Tax. Legally

Friday, November 10th, 2017

Everyone wants to pay less tax. Legally.

Even before your business starts growing, you need expert tax advice – and you need it regularly.  Our tax specialists can help you reduce your tax bills with expert tax advice, and professional tax planning for the future.

We provide a personal and tailored service for each client covering a full range of tax services including:

– business structures – which one is most effective for you? Sole trader, partnership, limited liability partnership or company?  With advice on whether your chosen structure remains relevant as your business grows

– business tax planning – starting in business for the first time, running an established business or planning a sale or retirement, there are many tax issues to consider

– Remuneration planning – advice on the most tax efficient way to reward directors, business owners and staff, and to extract profits from your business

– Property transactions – various taxes can apply to property acquisitions and sales, including capital gains tax, VAT and capital allowances. We can provide expert advice to ensure minimum tax exposure on property transactions

– company restructuring – we explain the various options and help plan and structure your business in the most tax efficient manner

– VAT – professional advice on VAT transactions and exemptions

– trust and estate planning – we’ll help you protect your wealth

– personal tax planning – effective planning can product significant savings

We know your business could benefit from our specialist tax advice and we’d like to offer you our services.  To be connection to one of our Tree Accountancy tax experts, please contact kate@treeaccountancy.co.uk

Help your new business grow with expert accountancy advice from Tree

Thursday, November 9th, 2017

At Tree Accountancy, we want to help you grow – because we know you’ll never stop being an entrepreneur!

Now that you’ve found what you’re really good at – and you’re seeing results, it’s time to grow your business.

Maybe sales are coming in thick and fast, your competitors are looking at what you do and you’re even hearing your name about town.

Now’s the time to expand your team, embrace new technology and evolve your value proposition further.  With the solid foundation you have in place, this should be more of a leap forward than a steady putter.

But stop. This is where many businesses get it wrong.  When you’re poised for expansion, this is the moment to bring in expert accountancy advice and consult with business experts.  Further planning is now required as your business grows and utilises the knowledge gained since your business start-up.  And many factors, such as technology, staff, recent innovations and business reporting structures can affect your next steps.

This is the time to meet with your accountant, revisit your financial model and accommodate any changes in your marketplace.  And above all, check any products and services which may be appearing from competitors.

Technology

A good entrepreneur will focus on how to get their business noticed in all the right places, and for all the right reasons.  Technology has been a huge friend to the business start-up and new innovations are constantly helping entrepreneurs build successful start-ups. There are many platforms that help you raise your profile, for example Instagram, Linkedin and Twitter reach customers and deliver service on a budget. The job of the entrepreneur is to get to know about these tools and stay up-to-date.

Team

As your business grows, so too will your role in managing the strategic growth of the company. Strong financial controls will naturally support your infrastructure, and staffing needs will grow too.  You will find that different levels of skills are required to cover the growing demands of your company including business and accountancy advisors who understand your marketplace and your strategic business plan.  Surround yourself with all the support you can to make it through this stage.

You may need to recruit management and other key members to join the team, too.  Share your vision for the company and its financial goals to ensure that any new team member understands how you got where you are, and can absorb your core business values.  The energy of the entrepreneur will often carry the team with them, wherever they’re headed.

Innovate

Now that your business is thriving, it’s time to consider what your next offering might be.   What’s the next product or service which is new or compliments your current offering?  This may require additional resources and the talent to realise it.  Find the next big thing, before someone else does.

By keeping your accounting team close, you will be able to build these new products or services into your updated financial model.  During this period, there will be a natural strain on the current business and by working closely with your accountant, you will be able to track whether investment or additional business advice should be sought.  Refinancing can take time (and patience) so it’s vital to plan and consult with an expert in this field.

Many new businesses, for example, are eligible to make Research & Development claims to HMRC which can lead to significant financial benefits.  Always seek professional accountancy advice beforehand so that you don’t miss out on any tax breaks.

Reporting

As your business grows, the frequency and detail of your financial reporting will increase.  Some of this can be provided internally and some can be outsourced.

The outsourced input and reporting should include:

– Payroll – this allows additional confidentiality

– Management packs – which include advice and variance analysis to the plan

– KPI reviews – to ensure your business is running efficiently, and that all costs are investments into its success, and profits are maximised

– Cashflow management

– Investment and finance facility review

– Tax-efficient planning for Director’s remuneration and growth

– Advisor/Finance Director services to support growth

– Employee benefits and retention review and implementation

First class financial reporting allows your business expansion plan to be reviewed on a regular basis.  Decisions can be made to keep on track or if required make the right choice by changing course.  Numbers alone do not help with this, but if prepared by a reputable accountancy firm and delivered with the input of a professional business advisor they can be priceless.

Once an entrepreneur, always an entrepreneur. To be connected to the right Tree business expert, contact Kate@treeaccountancy.co.uk