To September’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
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We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
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New anti-money laundering regulations take effect
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Pay) Regulations 2017 (SI 2017/692) took effect from 26 June 2017 and replace the previous 2007 Regulations with new statutory requirements for systems and procedures. Broadly, the regulations require firms undertaking certain financial activities to apply risk-based customer due diligence measures and take other steps to prevent the firm’s services from being used for money laundering or terrorist financing.
The regulations apply to a number of different business sectors, including financial and credit businesses, accountants and estate agents. Every business covered by the regulations must be supervised by a supervisory authority. – read more >>
Paying Class 2 NICs
Whether or not Class 2 National Insurance Contributions (NICs) can be paid depends on whether an individual falls within the definition of a ‘self-employed earner’ for NIC purposes, and if so, whether profits are in excess of the existing small profits threshold (£6,025 for 2017/18).
The definition of a self-employed earner is defined as someone ‘who is gainfully employed in Great Britain otherwise than in employed earner’s employment (whether or not he is also employed in such employment)’ (SSCBA 1992, s 2(1)(b)). A person who is regarded as self-employed for income tax purposes, and who is taxed on the profits from their trade, profession or vocation, is generally, but not always, regarded as a self-employed earner for NIC, which means they will be required to pay Class 2 and Class 4 NICs where applicable. By contrast, a person who receives investment income is not liable to pay NICs on that income.
Being liable to pay Class 2 NICs can be quite advantageous as contributions give access to certain contributory-based benefits for a relatively low outlay – £2.85 per week for 2017/18. For example, where NICs are not otherwise payable, it may advantageous for a landlord to consider turning ‘investment’ letting into a business to bring it within the scope of Class 2 NICs, which in turn will enable him to build up an entitlement to state pension. – read more >>
Double glazing salesmen was self-employed
Employment status tax cases often make the headlines in the professional press and the June 2017 case of Tomlinson was no exception. In this case, the First-tier Tribunal found that a double glazing salesman (Mr Malcolm Tomlinson) was self-employed and not an employee as he had claimed.
As with most employment status cases, this case focused on the details of the terms on which Mr Tomlinson was engaged with the company. – read more >>
Making Tax Digital for Business: update
In July, the Government confirmed that the Summer Finance Bill would be published in September, with the measures dropped from the pre-election Finance Bill being reintroduced in more or less the same form, from the initially planned commencement dates. Clauses dropped from the pre-election bill and expected to be brought back include those on Making Tax Digital (MTD), although the implementation date for income tax is being postponed.
There is widespread agreement that Making Tax Digital for Business is the right approach for the future. However a number of concerns about the pace and scale of change have been raised. As a result the government has announced that the roll out for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes.
Businesses will not now be mandated to use the Making Tax Digital for Business system until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold – the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.
This change means that no business will need to provide information to HMRC under Making Tax Digital for business more regularly than they do now. VAT has been online since 2010 and over 98% of VAT registered businesses already file electronic returns.
HMRC have confirmed that they will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.
From April 2019, businesses above the VAT threshold will be mandated to keep their records digitally and provide quarterly updates to HMRC for their VAT.
Auto-Enrolment changes: what obligations will small businesses face from October 1st?
Is your small business ready to fully comply with its obligations under Auto-Enrolment? Are you actually aware of what these obligations are, and what they will mean for SMEs? Well, if you’re unsure about the changes on October 1st, then here’s a brief explanation about exactly what’s going to happen later this year. – read more >>
Government pledges regional initiatives to rebalance national economy
One of the principle drivers in the last Government’s economic policies was targeted regional initiatives. These initiatives were intended to create a more balanced economy by driving regional growth and narrowing the gap between the South of England and the rest of the country. It was hoped that added investment would not only boost regional economies, but would also be of considerable benefit to small businesses. – read more>>
September Questions and Answers
Q. I have two small businesses which are treated as a group for VAT purposes, so we only submit a single VAT return covering both entities. Are we eligible to use the Flat Rate Scheme?
A. Unfortunately not. If you are part of a VAT group, or are eligible to join an existing VAT group, then you cannot use the Flat Rate Scheme (FRS).
There is also a rule which stops ‘associated’ businesses joining the FRS.
A business is ‘associated’ with another business if:
– one business is under the dominant influence of another;
– two businesses are closely bound by financial, economic and organisational links; or
– another company has the right to give directions;
– in practice, a company habitually complies with the directions of another. The test here is a test of the commercial reality rather than of the legal form.
If a business has been associated in this way with another in the last two years, but is not associated at the time an application to use the FRS is made, HMRC may allow the FRS to be used, if they agree in writing, that the former association is not a risk to the revenue.
Q. I am a sole trader and I run my business from home. I am using the cash basis for preparing my accounts for tax. Can I claim expenses for running my business from home?
A. Under HMRC’s ‘simplified expenses’ regime, if you work more than 25 hours a month from home, you should be able to claim flat rate expenses based on the number of hours you work. Current rates are as follows:
– between 25 and 50 hours worked per month: £10 per month
– between 51 and 60 hours worked per month: £18 per month
– 101 hours or more: £26 per month.
If you claim the flat rate, you don’t have to work out the proportion of personal and business use for your home, e.g. how much of your utility bills are for business.
Q. I work for a sandwich delivery company and I use the company’s electric van to do my round each day. I take the van home with me at night and I am allowed to use it in the evenings and at weekends if I so wish. What is the currently tax position for electric vans?
A. The tax charge on zero-emissions vans is currently going through a period of change. From 2015/16 to 2017/18 inclusive, a rate of 20% of the van benefit charge for vans which emit CO2 applies to zero-emission vans. The taxable charge for conventionally-fuelled vans is £3,230 for 2017/18.
This means that if you are liable to the van benefit charge, for 2017/18:
– if you are a basic rate taxpayer, you will pay tax of £129.20 (£3,230 x 20% x 20%); and
– if you are a higher rate taxpayer, you will pay tax of £258.40 (£3,230 x 20% x 40%).
The charge will rise to 40% of the van benefit charge for conventionally-fuelled vans in 2018/19; it will be 60% in 2019/20, 80% in 2020/21 and 90% in 2021/22. From 2022/23, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally fuelled vans.
September Key Tax Dates
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/9/2017
30 – Closing date to claim Small Business Rate Relief for 2016/17 in England