Don’t forget the Self-Assessment deadline

While most people will be focused on the festive celebrations at this time of the year, businesses and their owners must not forget the all-important Self-Assessment deadline.

The deadline for sending 2016-17 tax returns to HMRC is midnight on 31 January 2018.

The penalty regime for missing the 31 January filing deadline includes an initial £100 penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

Any tax due from the previous year must also be paid by midnight on 31 January, or penalties may also be issued for late payment of tax.

It is important that you do not leave submission until the last minute, as from experience HM Revenue & Customs tends to take a more careful view of those returns submitted near to the deadline.

If you haven’t submitted your tax return yet or provided information to your accountant to assist them with the necessary preparations, now is the time to act!

LINK: Self-Assessment deadlines

SMEs risk losing out on Christmas income totalling £2bn if they don’t accept cards

A new study has revealed that almost half of all shoppers will not spend money with a business this Christmas if it doesn’t provide facilities to pay by card.

A study, commissioned by card machine provider Paymentsense, has found that 45 per cent of UK shoppers walk out of cash-only smaller retailers and independent outlets because they cannot pay by card, while a quarter of customers are also unlikely to return to a business if it did not take cards on a former visit.

More than 1,000 consumers took part in the research, which also revealed that shoppers use their cards to spend just under £135 a month at smaller retailers, independent restaurants and cafes. It also found that 80 per cent of those surveyed owned a contactless card.

By extrapolating the data, the study suggests that more than £2 billion of consumer spending could be missed out on by small businesses which cannot take card payments in the month running up to Christmas.

Guy Moreve, Head of Marketing at Paymentsense, said: “Contactless card payment is fast becoming the norm, with our research showing that most consumers now use credit and debit cards. Shoppers now expect to use them almost everywhere – either in a traditional or contactless manner.

“As well as the significant revenue loss, our study suggests that smaller retailers and cafes who don’t yet take card or contactless payments could permanently lose every fourth customer, which would be a particularly difficult blow at this busy time of year.”

LINK: Cash-only SMEs risk Christmas losses worth a total of £2bn

Business rates to switch from RPI to CPI, saving SMEs billions of pounds

Businesses across the UK have welcomed the Chancellor’s decision to bring forward plans changing the way business rates are set by two years.

In the Autumn Budget, Philip Hammond announced that from April 2018 business rates would rise in line with the Consumer Price Index (CPI) measure of inflation, not the Retail Price Index (RPI). 

This move will help around 5.5 million small businesses to save up to £2.3 billion over the next five years, according to the Chancellor. 

Business rates were due to go up next year in line with September’s RPI of 3.9 per cent, but will instead stay in line with CPI that was three per cent during the same month. 

Helen Dickinson, Chief Executive of the British Retail Consortium, which campaigned for the switch alongside the British Chamber of Commerce, said: “It’s clear that the Chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills.

“Crucially, this relief will unleash investment that retailers want to direct towards the needs of their customers.” 

Within the Budget, Mr Hammond also promised a change to the law that has led to companies receiving much higher rates bills if their offices were in communal blocks or spread over several floors.

This move comes after the Supreme Court ruled that a single business space meant that small businesses using multiple spaces in a building had been billed for rates as if they were separate premises, but should not have been.

The Chancellor has also promised to backdate the law to compensate firms for the additional charges.

In April this year, many businesses saw a rise in their business rates, some experiencing more significant increases than others. This rise reflected the first adjustment of rateable property values for seven years.

Those hardest hit were retailers and offices in city centres where property prices have risen the most. 

To prevent a similar drastic rise in future, the Government has now committed itself to revaluations on a three year basis, instead of a five year basis as previously proposed.

LINK: Autumn Budget: Business Rates

Class 2 and 4 NIC merger delayed until 6 April 2019

The abolition of Class 2 National Insurance Contributions (NIC) will now be delayed until 6 April 2019, according to a new written statement to the House of Commons.

HM Treasury has written to MPs to let them know that the move has been delayed to allow additional consultation with interested parties, particularly in respect of the effect of the abolition of Class 2 NIC for lower earners.

Currently, self-employed workers that have profits below the small profits threshold (£6,025 for 2017/18) can protect their rights to the state pension and certain other state benefits by paying voluntary Class 2 contributions – this includes 967,000 people, according to the Office of National Statistics, who had income below the threshold.

However, those workers with profits between the Class 2 and Class 4 thresholds (£8,164) only pay Class 2 NICs of £148.20 per year to gain a full year’s NI credit, whereas Class 4 NIC currently provides the taxpayer with no NI credits, as it is a tax on profits.

The abolition of Class 2 NIC and a subsequent reform to class 4 NIC would leave some low earning taxpayers paying into the more expensive Class 3 NIC (£714 for 2017/18), to retain entitlement to the same state benefits.

There are also concerns amongst some professionals that the need to make a Class 3 NIC payment may create barriers and discourage lower earners from protecting their state benefit entitlements.

However, a system of NI credits would be provided for no payment where the individual has profits between the current small profits threshold and the higher Class 4 NIC threshold.

With all this in mind, it is apparent why the Treasury has decided to delay the abolishment of Class 2 NIC until thorough consultations have been completed.

LINK: Update on the National Insurance Contributions Bill

Simple by name, but not necessarily by nature

Earlier this year, HM Revenue & Customs (HMRC) introduced Simple Assessments for some taxpayers who have, until now, been required to complete Self-Assessment Tax Returns.

Those affected are taxpayers with relatively straightforward financial affairs where HMRC considers that it already has sufficient information to be able to calculate the tax owed.

The first groups to be subject to the Simple Assessment regime are people who started to receive a State Pension in 2016-17, where their income exceeds the personal allowance, and PAYE taxpayers who have underpaid tax that cannot be collected through their tax code. An example of the latter is where the amount owed is more than £3,000.

Because neither of these groups were already within Self-Assessment, no one has yet been taken out of the regime.

Existing state pensioners, with incomes above the personal allowance, will have been within the Self-Assessment regime until now. They will receive Simple Assessment notifications in respect of this year’s (2017-18) income early in 2018.

If you receive a Simple Assessment notification, you will have just 60 days in which to request an amendment, if any of the information in the notification is incorrect. It is also important to check whether there are any reliefs you are entitled to. This could be in respect of Gift Aid or employment-related expenses, for example. These will need to be included on the form and it is worthwhile seeking professional advice at this stage, as identifying which reliefs you are entitled to can be a complex task, yet the tax savings can be significant.

The deadline for the payment of tax under the Simple Assessment regime is the same as that for Self-Assessment; 31 January. The exception to this is where the notification is received after 31 October 2017, in which case payment will be due three months after the date of the notification.

Payment in respect of tax under the Simple Assessment regime can be made either by way of a cheque or by logging into your Personal Tax Account online.

Link: How simple is Simple Assessment?

Chasing outstanding debts from an individual or sole trader? The process has changed

Outstanding payments can be a major headache for SMEs as they can have a significant effect on cashflow and seeking payment can take up time that would be better spent on running the business.

In fact, according to Bacs, the not-for-profit entity that runs the eponymous payment service, late payments cost UK SMEs more than £2 billion each year.

This means that recent changes to the procedures for pursuing a debt owed by an individual or a sole trader before taking court action are likely to be of widespread interest.

Indeed, it is a good idea for all business owners to be familiar with the procedures, should an issue arise.

The new Pre-Action Protocol for Debt Claims came into force on 1 October 2017.

It applies to all businesses, including sole traders, who are seeking payment of a debt from an individual, again including sole traders.

It only applies to business cases where the debtor is a sole trader. It does not apply where other Pre-Action Protocols are in effect, such as in relation to construction claims.

No Pre-Action Protocol previously existed in respect of Debt Claims, but businesses were expected to comply with the Practice Direction for Pre-Action Conduct.

The new Pre-Action Protocol sets out specific steps that businesses need to follow and details the required content of the letters that must be sent to the debtor prior to court action.

It also contains an information sheet and reply form that should be sent to the debtor.

The Protocol is intended to resolve more cases before court action is necessary.

Link: The Pre-Action Protocol for Debt Claims

Chancellor fails to deliver on Office for Tax Simplification’s VAT simplification recommendations

The Office for Tax Simplification (OTS) recently published its findings following a review intended to ensure the VAT system remains relevant.

On the basis of its findings, the OTS made eight core recommendations:

  1. The Government should examine the current approach to the level and design of the VAT registration threshold, with a view to setting out a future direction of travel for the threshold, including consideration of the potential benefits of a smoothing mechanism.
  2. HM Revenue & Customs (HMRC) should maintain a programme for further improving the clarity of its guidance and its responsiveness to requests for rulings in areas of uncertainty.
  3. HMRC should consider ways of reducing the uncertainty and administrative costs for businesses relating to potential penalties when inaccuracies are voluntarily disclosed.
  4. HM Treasury and HMRC should undertake a comprehensive review of the reduced rate, zero-rate and exemption schedules, working with the support of the OTS.
  5. The Government should consider increasing the partial exemption de minimis limits in line with inflation and explore alternative ways of removing the need for businesses incurring insignificant amounts of input tax to carry out partial exemption calculations.
  6. HMRC should consider further ways to simplify partial exemption calculations and to improve the process of making and agreeing on special method applications.
  7. The Government should consider whether Capital Goods Scheme categories other than land and property are needed, and review the land and property threshold.
  8. HMRC should review the current requirements for record keeping and the audit trail for options to tax, and the extent to which this might be handled online.

Several of these points refer to the threshold or exemptions that allow businesses or organisations to remain outside of the current VAT regime or pay less tax.

However, in his Autumn Budget on 22 November, the Chancellor did not announce any measures to bring the OTS recommendations into effect.

The UK has one of the developed world’s highest registration thresholds for value-added tax, which effectively provides the country’s businesses with £2 billion worth of relief, by allowing them to remain outside of the regime.

In comparison to the UK’s £85,000 threshold, the EU has an average VAT threshold of £20,000, while the global average is around £15,000.

It is feared that the UK’s high threshold not only prevents the Revenue from collecting additional tax but also actively discourages businesses from expanding above the threshold.

Many businesses see VAT registration as an obstacle to competitiveness and profitability, as in most cases they will not be able to pass on the increase in their costs to customers, which provides unregistered businesses with an advantage.

LINK: OTS report on routes to simplification for VAT is published

Autumn Budget Breakfast – Helping businesses become Fit for the Future.

A dark and cold November morning didn’t deter Howard Worth’s clients and professional contacts from attending a budget breakfast event at the Macdonald Portal Hotel on Wednesday 29th November, a week after the first Autumn Budget took place, to hear tax and financial experts dissect the Chancellors speech. 

A crowded room listened to Managing Partner Richard Barnett’s introduction containing a summary of some of the political and economic changes since the last budget in March and the two main themes that ran through Philip Hammond’s speech, Property & Technology.

The first of the speakers was Independent Financial Adviser Catrina Walker-Jones, who discussed the positives and negatives of the budget. She analysed the performance of the global markets since Brexit and with the current pension freedoms in place it is more important than ever to seek professional financial advice when planning for the future. 

Suzanne Preston, Farming and Rural Business Partner followed next, she covered the changes to the complex area of partnership taxation and its impact on business. Housing and Development was highlighted, in particular the potential intervention measures local authorities may obtain to progress housing developments. 

Tim Lwin, Tax Partner was the final speaker. His presentation echoed the Chancellors message of “Building a Britain fit for the future”. Tim explained the various Tax reliefs for businesses that are available. Research & Development (R&D) is an area that most people associate with scientists and laboratories, however, this was demystified and various examples were discussed which highlighted how almost every industry sector should be able to access the tax reliefs, even a company producing pies!

To mirror the Chancellor, Tim saved the best till last in the form of an early Christmas present for businesses – Tim’s Top Ten Tax Tips, featuring ten tax savings opportunities currently available to companies enabling them to reward their employees and at the same time take advantage of tax reliefs.  His favourite tip was the Trivial Benefit tax exemption – ideal at this time of year to use for Xmas gifts for staff!  

Pottery and Property – The perfect partnership!

The inspiring facilities at the World of Wedgwood were the location for a unique property investment event on the 29th of November. Attendees were able to hear from Paul Williams – the man leading Stoke-on-Trent’s bid to become city of culture in 2021 and how the whole of the potteries would feel the positive effects that could come from the new investment.   Speakers from Howard Worth, Rockett Home Rentals and Bowcock Cuerden covered subjects relating to purchasing property, including why to buy in Stoke-on-Trent and the current development of the area, the Tax implications and potential savings that can be achieved from forward planning and the legal requirements that a landlord has to undertake relation to his tenants.

Guests enjoyed a visit to the onsite Museum which houses the V&A Wedgwood collection and a private tour of the factory where they witnessed the highly skilled staff undertaking the delicate decoration of the pieces of pottery. 

Selection box support for St Luke’s

Our staff showed their generosity and kindly donated selection boxes for a festive fundraising campaign running at St Luke’s Hospice. 

During the festive season Santa gets his elves to decorate the St Luke’s Big Red Bus and turn it into a magical grotto, which then travels round Cheshire to visit eager young children. Each child who visits Santa receives a gift of a small selection box. Our team was delighted to donate to this wonderful appeal and spread some joy at Christmas!