I am often asked handles my direct debit scheme as many small businesses do not have enough volume to have a direct debit scheme through their banks.
I decided to add a page specifically for direct debit schemes Direct Debit Scheme for Small Businesses.
You can also contact me for further information.
The Small Business, Enterprise and Investment Bill received Royal Assent on 26 March, 2015. Companies House has published the following timetable for bringing the company law provisions of the new Act into force:
Bearer Shares
The prohibition on issuing new bearer shares will come into force in late may or early June 2015. Holders of existing bearer shares will then have nine months in which to surrender those shares in exchange for registered shares.
October 2015
The following changes will come into force in October, 2015:
Significant Control
From April 2016, all companies will be required to keep (and make availablefor public inspection) a register of ‘people with significant control’ over the company.
‘Significant control’ includes (but not restricted to) owning 25{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of the shares, or being able to exercise 25{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of the voting rights, or being able to appoint a majority of the Board of Directors.
Companies House says that, from January 2016, companies should compile the information required for this register.
Annual Return
From April 2016, the requirement to file an Annual Return at Companies House will be replaced by a requirement to ‘check and confirm’ the information already filed at Companies House at least once every twelve months.
Private companies, which most owner-managed business are, will be allowed to file certain categories of ‘optional information’, in addition to the information required by law.
Private companies will also be able to keep certain information on the public register, instead of a statutory register. This will apply to the registers of members, directors, company secretaries, directors’ residential addresses and the new register of ‘people with significant contro’ (PSC’s).
Comment
Your accountant should be able to advise on these changes when they come in.
In the hospitality trade tips and gratuities are part of an employees reward for good service.
I dined out this evening and added a gratuity to my debit card payment and my wife, unaware of this also left a cash tip on the table for the waitress (a double tip can be quite unsettling for us accountants).
This got me thinking and as a typical accountant I thought it a good idea to do a blog on HMRC’s advice on the subject (a bit sad I know!).
Employees receiving tips have to pay tax on any tips they get, and sometimes National Insurance contributions as well.
How the tax is worked out, and whether you have to pay National Insurance depends on:
Cash tips paid directly to the employee
If an employee is given a tip in cash directly by the customer, the employee must pay tax on them but not National Insurance by declaring tips on their Self Assessment tax return.
If the employee does not normally complete a tax return then HMRC will estimate their tips based on business sector and/or information from the employer. The tax on the tips will then be collected through the PAYE system by an adjustment to the employees tax code.
Tips included in card or cheque payments
If these tips are paid to the employee directly, the employer is responsible for making sure that it is included as part of the pay subject to tax through the PAYE system.
Sometimes the tips are pooled together and shared out – this is called a ‘tronc’ and has a separate PAYE registration and the person who looks after the ‘tronc’ known as the ‘troncmaster’ is responsible for making sure tax is deducted from the tips.
HMRC has a detailed guide on tips and troncs if you are or have a troncmaster
.
If the employer decides how the tips are shared out, National Insurance is due as well as tax. The employer is responsible for making sure tax and National Insurance is deducted through PAYE.
Service Charges
These are added to the bill before it’s given to the customer.
If the charge is compulsory, it’s not a tip so if it is given to the employees, it is treated as part of their wages and subject to tax and National Insurance.
If the charge is voluntary, the employee pays tax and National Insurance in the same way as for tips above.
Bonuses
These are part of wages and subject to deduction of tax and National Insurance through PAYE.
Cash in hand wage payments
It is illegal for employers to pay wages ‘cash in hand’ without deduction of tax and National Insurance.
Remember
Discuss any issues raised in this blog with your accountant before taking action as every business has different circumstances.
With effect from 1 April, 2015 the VAT registration and de-registration thresholds are uprated as follows:
Registration threshold £82,000 (previously £81,000)
De-registration threshold £80,000 (previously £79,000)
For most small businesses it’s the historic turnover test that will determine when they are required to register for VAT. The trader must look at the value of taxable supplies made on a rolling twelve-month basis, or for new businesses since trading commenced. HMRC must be notified within 30 days of the end of the month in which the registration threshold was exceeded.
It is not enough to wait until your year end and your accountant informing you that you have exceeded the VAT threshold as you may face late registration penalties.
To help you, I have a spread sheet produced by one of my associations (the 2020 Group) that has been updated for 2015/16:
2020-VAT Registration Tool_2015-16 When the spreadsheet comes up you need to click on ‘Enable Editing’ and then ‘Enable Content’.
Speak to your accountant during the year if your not VAT registered and think your annual turnover is close to the threshold. It may be too late to avoid backdated VAT and penalties if you wait until you drop your books off after your year end.
HMRC’s benchmarking team is targeting more trade sectors and extending it to VAT returns.
In November, 2014 HMRC started to analyse accounts submitted by businesses in certain sectors.
HMRC staff have always used business ratios to identify businesses falling outside expected norms. What is new now is that HMRC’s use of technology for risk analysis is becoming much more sophisticated.
HMRC can review a businesses net profit or VAT mark-up ratios from:
HMRC’s benchmarks are not published anywhere and if you receive a benchmarking letter you should provide a copy to your accountant as they are not being copied by HMRC.
Previously HMRC sent a letter out headed Benchmarking – Are you happy with your performance? This resulted in some businesses ‘coming clean’ and the tax haul increased. Here is an example of the letter sent out:
Today targeted business sectors may receive a Net Profit Ratio letter from HMRC stating the expected percentage range of net profit to turnover. Here is an example of one sent to pharmacists:
Alternatively, targeted business sectors may receive a VAT mark-up letter stating the expected percentage ratio of sales excluding VAT and purchases excluding VAT. An example of the letter sent to car mechanics and details of the ratio calculation is here:
HMRC comes up with their expected ratios by reviewing the tax returns filed for the business sector over the past three years. Of course, these ratios can change over time.
HMRC does not publish the benchmarks anywhere, some have been found out from businesses that have been sent a letter.
So far the net profit ratios available are:
The only VAT Mark-Up ratio I know at the moment is:
I will add to these lists as I become aware of new ratios.
Even if your ratios are outside HMRC’s expected ones, there may be a good reason for it. If you have maintained accurate bookkeeping records and included all income and expenditure and can show HMRC that your accounts are true you have nothing to worry about.
Following my previous blog Class 2 National Insurance from April 2015 a client asked me a question:
“Should I take advantage of paying no Class 2 National Insurance as my earnings are below the £5,965 small profits threshold?”
Answer:
As Class 2 National Insurance counts towards the state pension (and some other state benefits such as maternity allowance), it would be advisable for her and other self employed people with small profits and not having any employment income, to take up the option of making voluntary Class 2 NI payments.
There may be exceptions and one would be anyone who reaches state pension age on or after 6 April, 2016 who has already reached the 35 years’ contributions needed to earn the maximum new flat-rate state pension.
If you don’t know how many years’ contributions you have made, you can go onto the Governments Future Pension Centre page and follow the instructions and download and complete the PDF Form BR19 or complete an interactive PDF version of form BR19 online and download it.
The form should be sent to the address on the form which is:
Newcastle Pension Centre, Futures Group
The Pension Service 9
Mail Handling Site A
Wolverhampton
WV98 1LU
I know, the Newcastle Pension Centre is in Wolverhampton!
Alternatively, you can call them on 0845 3000 168 or 0345 3000 168.
In the past if your self-employed earnings are below the small earnings threshold, just after 5 April you would be completing the 2015/16 deferment application for Class 2 NI.
From 6 April, 2015 deferment applications are no longer needed as there is a change in the way Class 2 NI is paid. Previously, you paid Class 2 NI each month at a fixed weekly rate.
From 6 April, 2015 Class 2 NI, like Class 4 NI, will be payable with income tax through your self-assessment tax return each year. Therefore, the Class 2 NI for the 2015/16 tax year will be due on 31 January, 2017. For those with small earnings, Class 2 NI will only be due on that date if your profits are above the small profits threshold (just a new name for the small earnings limit) which is set at £5,965 for 2015/16.
The Pensions Regulator has produced a checklist for employers in respect of workplace pension auto-enrolment. The guide can also be downloaded by clicking the link below it.
Please speak to your accountant or payroll bureau for further advice regarding your specific situation.
If you have a limited company and you are the only director/shareholder with no other employees, HMRC will be sending you a letter at some point to explain your situation regarding pension auto-enrolment.
The letter is aimed at single director companies and explains that as you are only paying yourself, and you do not have any other workers, you are exempt from auto-enrolment.
I was asked a question by a client, who had a company and she was the only director/employee (‘one-person company’) – “Can I pay myself a salary above the £8,060 you suggest in your blog tax efficient salary & dividend mix to make full use of the £2,000 National Insurance Employment Allowance?”
Anwer:
In 2015/16 the Employment Allowance of £2,000 is equal to employers’ National Insurance on earnings of £22,605. At this salary level the Employers’ National Insurance payable would be £2,000 but after taking advantage of the Employment Allowance of £2,000, there is no Employers’ NI to pay.
This is not worthwhile doing as the additional tax and Employees’ NI deducted from the salary would total £4,146.40 which exceeds the additional Corporation Tax relief of £2,909, so she and her company would be worse off by £1,237.40.
Summary
Since the government’s mortgage review following the 2008 banking crash, most lenders require evidence from HMRC in the form of a tax calculation which is only provided on form SA302. It is no longer good enough for accountants to complete an Accountant’s Certificate confirming income.
The problem is that HMRC only sends out Form SA302 as routine if a paper tax return is filed. As most accountants file clients tax returns electronically, the accountant or client has to phone HMRC (and that can take a long time, see cost of calling HMRC) to request a copy which can take up to 14 days to arrive.
In mid-December 2014 HMRC announced that the Council of Mortgage lenders had agreed that self-employed mortgage applicants could provide proof of income by printing off the “tax calculation” and the “tax year overview” from their HMRC online account.
Unfortunately, most self-employed use an accountant to handle there tax affairs and most accountants use third party software to file tax returns and therefore do not have an HMRC online account and therefore cannot download these two documents. This means we are back to phoning HMRC for a copy of Form SA302.
My advice, if you are going to require a loan or mortgage in the near future is to call HMRC and request the last 3 years Forms SA302 so that you have them ready for when you apply for the loan or mortgage. You will still need an Accountant’s Certificate to accompany the Forms SA302 and this is normally subject to a fee.
Apple unveils their latest ‘must have’ laptop, read more in the April 2015 Client E-News:
Contact me if you would like further information on the contents of the client newsletters.
Apologies for the delay in posting the March 2015 Client E-News (it bumped into the April one).
Contact me if you would like further information on the contents of the client newsletters.
All limited companies small or large will now pay just 20{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} corporation tax. I hope this encourages global businesses to not only locate in the UK but to also pay their taxes.
Here is the April 2015 Budget Highlights tax E-Newsletter:
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Call me if you would like further information on the contents of the tax newsletters.
At this time of year owner managers of limited companies “what is the most tax efficient split of salary and dividend in the new tax year?”
Provided your company is not caught under the IR35 rules (your accountant will have told you if you do), from 6 April, 2015 the tax factors to consider are as follow for the 2015/16 tax year:
If the only consideration is the most tax efficient remuneration from the company and you will not be wanting more than £100,000 in total, a tax efficient salary/dividend split would be:
Salary £10,600 PA (£883.33 per month)
This salary level would result in Employees’ National Insurance being deducted of £304.80 PA (£25.40 per month). The good news is that the additional tax relief the Company gets on the part of the salary above the National Insurance threshold of £8,060 is £508.00 PA (£42.33 per month) resulting in £203.20 less tax to pay each year after the National Insurance paid is taken off.
The balance of remuneration can be paid as dividend (subject to the retained profits after tax of the company).
The first £31,785 of dividend above the £10,600 salary would attract no additional tax on the director/shareholder as total income reaches £42,385 which is the 40{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} higher rate band threshold.
Any dividend you pay yourself above the £31,785 is subject to additional tax. The tax you pay on it is 25{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of the net dividend providing it does not exceed £150,000 (basically you need to put away £250 for each £1,000 of dividend to cover the tax).
Any dividend you pay yourself above the £150,000 is subject to additional rate tax. The tax you pay on it is 30.556{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of the net dividend (basically you need to put away £305.56 for each £1,000 of dividend to cover the tax).
This is a general summary of the tax efficient remuneration for owner managers of limited companies. It is essential to speak to your accountant before acting on the above as everyones circumstances are different and there may be other factors to consider.
Please note that this TED Talk has moved here
In this 6 minute October, 2014 TED Talk, Bel Pesce considers if we have dreams it is our responsibility to make them happen, whether in our business or personal lives. It is also important to enjoy the journey to our dreams.
All of us want to invent that game-changing product, launch that successful company, write that best-selling book. And yet so few of us actually do it. Brazilian entrepreneur Bel Pesce breaks down five easy-to-believe myths that ensure your dream projects will never come to fruition.
Bel Pesce has worked at big technology companies — in at internship at Microsoft, she led the team for Microsoft Touchless and, as an intern at Google, she worked to improve the Google Translate system. She has also worked in finance, at Deutsche Bank, and helped launch several startups — most notably, the video platform Ooyala and Lemon Wallet, an app that replicates the contents of your wallet on your phone. But for her latest venture, Pesce is looking to inspire. She has opened a school, FazINOVA, which is dedicated to helping students — both in live courses in Sao Paulo, Brazil, and online — persevere toward their dreams. The school has grown tremendously since its establishment in 2013.
Pesce, a TED Fellow, is also the author of three books: The Brazilian Girl from Silicon Valley, Superheroes: WANTED and The Girl from Silicon Valley 2. She has been named one of the “100 most influential people of Brazil” by Época Magazine.
My blog’s for this event have moved here
There is a lot to enjoy in Addingham for the next bank holiday weekend on 1 to 4 May, 2015.
At the Crown Inn, the ‘May Ball’ black-tie do on Friday 1st May will help raise money as part of ‘Nadia’s Wish’ which this year is raising money for Manorlands Hospice in Oxenhope where Nadia lost her battle with breast cancer in 2011 and Cruse Bereavement Care which provides support to people who have lost someone close to them. Over the last two years Nadia’s Wish has raised to date a fantastic £7,767.48!
Maria Well’s landlady of the Crown Inn, Addingham, Nadia’s sister Galina Harrison and friend Beck Shaw set up ‘Nadia’s Wish’ in her memory to raise money for different causes which Nadia would have wanted to support, as well as Manorlands Hospice in Oxenhope where Nadia died.
Nadia Shaw (Mitchell) lost her battle with breast cancer in 2011 aged just 33, but her death has inspired family and friends to raise money annually in her memory.
On the night of Friday 1st May the weekends events kick off with the “May Ball 2015 Black Tie” at 8.00pm till late at the Crown Inn Addingham with live entertainment from Ticket 415 and No 1 local DJ Martin Roe. This all takes place in the Marquee and there will be an outside bar and BBQ – Tickets £10 which can be purchased in advance at the Crown Inn.
Following some shut eye, a big fry up (breakfast available at the Crown Inn) and a recovery morning, Saturday 2nd May sees the start of the Crown Inn Beer Festival and Balloon Launch from 4.00pm with live music from ‘Last Orders’ at 6.00pm.
For anyone with any energy left, the Beer Festival continues on Sunday 3rd May at 12 noon with live music from Dr Bob & The Blues Makers at 4.00pm.
As an added bonus and following last years’ Tour de France in Yorkshire, the Tour de Yorkshire’s third and final leg from Wakefield to Leeds comes through Addingham. The route is a 104 mile (167km) non direct circuit going west from Wakefield to the Pennines then north to Silsden Abbey and finally south east on the A6034 to Addingham and along the Main Street cutting through the village from the Silsden end and passing the Crown Inn before continuing to Ilkley and Otley towards the finish in Leeds.
Did you know? In the Doomsday Book, Addingham is referred to as ‘Ediham’, which probably meant ‘home of Edi’ the Earl Edwin of Bolton Abbey. Nowadays, it is a picturesque village with a good pub or two! In fact there are 5 pubs but the Crown Inn is the only free house in this village.
HMRC uses 0300 numbers for ‘customers’ to call them.
Calls to 0300 numbers according to HMRC’s web site cost:
The BBC reported this year that 34.5{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of callers were cut off after paying for the waiting time.
Which? found that the average waiting time they had to wait to speak to an adviser was 18 minutes. On one call they were left waiting 41 minutes! They found the shortest waiting times were before 10.00 am. I personally find phoning before 9.00 am faster still (before us accountants start ringing, although we have a fast agent direct phone number which is answered quickly for client Self Assessment matters but not available for other taxes).
Basically, expect to wait a while, before phoning deal with comfort breaks and pour yourself a beverage, use hands free with your phone if you can so that you can continue working.
So what is the cost of the call, well, excluding costs when you don’t get through before you are automatically cut off by HMRC who ask you to call back later:
From a land line:
From a mobile:
Is it not time HMRC had a normal land line number to save the tax payer from paying more than their taxes?
Tax payers that live abroad have a normal land line number to call, those tax payers feed the economy of another country and pay less to call HMRC. We UK residents feed the UK economy with our everyday spending but are charged at a premium rate to contact HMRC. Surely things must change?
My blog’s on ‘Safety on our roads’ has moved here
I appreciate that Jeremy Clarkson has had his contract terminated by the BBC and the remainder of the Top Gear series will not be aired. I am, however, dismayed that the village I live in, Addingham near Ilkley seems to have replaced York’s Elvington Airfield racing circuit for Top Gear’s ‘sensible car test’.
Roads are dangerous enough without speeding vehicles ploughing through the country roads and villages.
Addingham has a 20 mph speed limit through the main village street. There is a good reason for this, a narrow road with parking, primary school children going to and from school and buses that stop traffic movement when static at a bus stop.
I, like many other drivers, want a fast journey, however, it should not be at the risk of death or injury to others.
I am tired of cars, taxis, council & highway maintenance vehicles and occasionally buses exceeding, not only the 20 mph speed limit but way beyond in excess of 30, 40 and even 50 plus mph!
There are no traffic calming measures in Addingham and hardly any police presence which ‘allows’ drivers to ignore the speed limit in the village. Perhaps it is time to have a police presence to catch speeders (the Treasury would make a fortune from fines – maybe enough to re-instate the Addingham to Ilkley railway perhaps?)
I’ve seen children and the elderly being nearly hit by speeding drivers who find them an inconvenience whilst they crossed the road slowly!
At some time there will be a major accident and quite possibly a child or adult killed. Should we really have to wait for a death of an innocent child or adult before action is taken?
I often see young mothers speeding in their cars with their child in a child seat. How would they feel if another driver killed or injured their child as a result of speeding?
I feel it is time for speed cameras and although I disagree with speed humps in the road, perhaps Addingham warrants them.
Addingham is just one village and I am sure there are many other villages around the country have the same problem with inconsiderate and dangerous drivers.
Update
On Wednesday 8th April, 2015 just a week after this blog there was an accident on Addingham mains street. A car reversed out into the road and a car going along the main street breaked and the car following ploughed into the back of the breaking car that was shunted into the car reversing out. Judging by the damage the car that ploughed into the one in front must have been driving well above the 20 mph speed limit.
Just after the accident, I spotted many cars speeding, plus light goods vehicles and even a Royal Mail van!
My letter in the Ilkley Gazette:
Please note that my blog’s on Alcohol free and Low Alcohol Drinking have moved to here
A question I am often asked is “What is the difference between Shloer and a de-alcoholised wine?”.
Shloer is a drink produced by blending grape juices to produce a non-alcoholic drink that is pleasant but is not wine and has not been produced the same way as wine.
On the other hand, de-alcoholised wine is produced as real wine with alcohol at the winery and then aged in wine barrels until it is mature enough for consumption. Much of the wine is then bottled for drinking as a fully alcoholic wine.
The remainder of the wine, wine not bottled as a fully alcoholic wine, goes through one of three processes to remove the alcohol at cool temperatures to avoid damaging the wines, either:
The quality of the finished product can vary like any wine, however, de-alcoholised wine caught the attention of the wine world when Ariel Vineyards of California entered their de-alcoholised Ariel Blanc into an international professional wine competition and it won a Gold Medal against wines with alcohol!
The Steam Vacuum Process
This method is still used by Carl Jung Winery today and their de-alcoholised wines are readily available from the Alcohol-Free Shop by mail order or collection.
The vaporisation temperature of alcohol is lower than that of other liquids so , under normal circumstances, it would be necessary to boil wine at high temperatures to steam off the alcohol so damaging the delicate flavours. The Steam Vacuum process was pioneered in 1904 by Carl Jung. This process is done in a vacuum where vapourisation can be achieved at much lower temperatures. The wine therefore looses its alcohol but retains the characteristics and flavours that would be lost with normal boiling.
Reverse Osmosis Process
This is the method used by Ariel Vineyards of California who have won several Wine Competition awards since winning gold medal at the 1986 Los Angeles County Fair. Their de-alcoholised wines are readily available from the Alcohol-Free Shop in Manchester by mail order or collection.
Some of ARIEL’s varietal wines are are aged in small oak barrels, and all are fined and filtered according to traditional wine making methods. Finally, more than 99.5{8ee99a90b51e2217d12101096daf2ee9e40c43b9c2fa413e32f91dd0a196a214} of the alcohol is removed through our gentle cold filtration process. This process, which uses reverse osmosis, allows alcohol to be removed from ARIEL while retaining many of the qualities found in traditional wine! Check out how ARIEL is made:
Centifugal Force (Spinning Cone) Process
This is a method used by Fre Wines of Napa Valley in California who’s de-alcoholised White Zinfandel wine won the gold medal at the 2014 Jerry D. Mead’s New World International Wine Competition. Their de-alcoholised wines are readily available at ASDA.
Pioneered in Australia, spinning cone technology uses a combination of centrifugal force and nitrogen gas to separate and preserve a wine’s essential flavours and fragrances during the de-alcoholisation process.
How it works:
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