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‘Can the work Christmas party be claimed back as a business expense?’

‘Can the work Christmas party be claimed back as a business expense?’

Knowing which work-related outgoings can be classed as a business expense can be bit of grey area for companies to understand.

One area that many businesses aren’t always too clear about is whether or not they can class their work Christmas party as a business expense.

HMRC does provide incentives for limited companies, but unfortunately not for sole traders. A 19% tax exemption via Corporation Tax on all festive entertaining costs is currently permitted, providing the:

  • Party is an annual event
  • Party doesn’t cost more than £150 (including VAT) per person
  • Is open to all employees (and consists mostly of employees)
  • Shareholders aren’t included in the exemption if they aren’t employees or directors

What’s more, it’s also possible for businesses to claim an additional £150 per person for a plus one for each employee, providing they are a family member or partner.

However, it’s important to remember that this is an exemption, not an allowance

So, if your party costs £151 (or more) per person, you cannot claim the first £150 as a business expense – the whole thing will be taxed as normal.

Many limited companies hold more than one annual event. Limited company contractors are free to do the same too. For example, you could choose to hold both a Christmas event and a summer function. Providing the total combined costs of each individual event do not exceed the maximum £150 per head, the tax exemption still applies.

If any individual event costs exceed this, then HMRC will only apply the exemption to expenses for the events that fall within the allowable limit.

 For more guidance and support on whether your Christmas party is tax deductible or for general advice on business expenses, contact us on 01905 777600 or hello@ormerodrutter.co.uk.

Autumn Budget 2018 – key tax highlights

Autumn Budget 2018 – key tax highlights

 

Chancellor, Philip Hammond, delivered his third Budget on Monday (October 29) at a time of continued economic uncertainty fuelled by the on-going Brexit negotiations.

 

The last Budget to be delivered before Brexit, the Autumn Budget 2018 lasted 72 minutes and was used by the Chancellor to say that the era of austerity ‘is finally coming to an end.’ He also predicted that UK borrowing this year would be £25.5 billion – £11.6 billion lower than predicted in March.

 

A number of wide-ranging measures were announced by the Chancellor, which will impact both businesses and individuals. They include making a one-off payment of £400 million for schools to allow them to ‘buy the little extras they need.’

 

Mr Hammond also revealed a further £650 million will be given in grant funding to local authorities to spend on social care, an extra £20.5 billion will made available to the NHS over the next five years and all first-time buyers purchasing shared equity homes of up to £500,000 will be eligible for first-time buyers’ relief. There will be a freeze on fuel duty for the ninth year in a row.

 

From a tax perspective, key highlights include:

 

  • The Annual Investment Allowance will be increased from £200,000 to £1 million for a period of two years from 1st January 2019

 

  • Lettings relief from Capital Gains Tax on let property, which has been the owner’s main residence, will in future only be available where the owner occupies the property with the tenant. This relief is currently worth up to £80,000 in terms of the reduction of capital gain for a married couple. The change takes effect from April 2020.

 

  • Currently the last 18-month period of ownership of a main residence is deemed to be owner occupation for the purposes of the PPR Capital Gains Tax exemption. That 18-month period will now be reduced to nine months; That change starts from April 2020.

 

  • The current qualifying period for Entrepreneurs’ Relief is to be increased from 12 months to two years; Starting from 6th April 2019.

 

  • The IR35 public sector rules are to be extended to the private sector. This extension will be delayed until April 2020 and will only apply to large and medium-sized businesses

 

  • The Personal Allowance will be increased to £12,500 from April 2019

 

  • The Higher Rate threshold will be increased to £50,000 from April 2019

 

The points listed below are an overview of some of the key points that were announced in the Autumn Budget 2018. The full details can be found here –  https://www.gov.uk/government/publications/budget-2018-documents/budget-2018

 

For one-to-one advice on any of the issues raised in the Chancellor’s latest Budget speech or for guidance on making sure your accounts are up-to-date and submitted in a timely manner, as well as making sure your profitability is kept to a maximum and your tax liability to a minimum, contact David Gillies on 01905 777600.

Capital Gains on UK property sold by non-UK residents – explained

What is the definition of Capital Gains Tax?

According to HMRC, Capital Gains Tax (CGT) is defined as – ‘A tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.’

For example, you buy a house for £100,000, but then decide to sell the same house at a later date for £150,000. This means you have made a capital gain of £50,000.

What do I do if I’m a non-UK resident and have sold UK residential property?

If you’re not living in the UK, but have sold or disposed of a residential property in the UK on or after 6th April 2015, keep reading because this post tells you everything you need to know, starting with how long you have to declare the sale of the property and HMRC’s definitions of whether you’re a UK resident or a non-UK resident.

How long do I have to declare the sale of UK residential property?

Non-UK residents are obliged to tell HMRC about any CGT on UK residential property within 30 days of the property sale; even if there’s no CGT to pay. For example, if you sell the property on 1st July 2018, you must make a declaration to HMRC by 31st July 2018.

You must report the disposal using the Non-resident Capital Gains Tax Return within this deadline even if:

  • There’s no tax to pay
  • A loss has been made
  • You’re registered for Self-Assessment
  • You’re registered with HMRC for Corporation Tax

If the property in question was owned by more than one individual, each owner must complete the Non-resident Capital Gains Tax Return.

UK resident vs non-UK resident

UK resident

You’re always going to be classed as a UK resident if:

  • You spend 183 or more days in the UK in the tax year
  • Have a home in the UK – you must have owned, rented or lived in this property for at least 91 days in total – and spent at least 30 days in the country in the tax year

These are just a couple of the ways you can qualify as a UK resident, but it’s not always this simple and some cases can be very complex, so it’s always best to seek expert advice rather than make any assumptions.

Non-UK resident

You’re always going to be considered as a non-UK resident if:

  • You spend less than 16 days in the UK (or 46 days if you haven’t been classed as a UK resident for the three previous tax years)
  • Work abroad full-time (averaging at least 35 hours a week) and spend fewer than 91 days in the UK, of which no more than 30 were spent working

If you need more of a steer on whether or not you fall into the UK resident or non-UK resident bracket, get in touch and we’ll be more than happy to help you identify the correct status.

Calculating payment

You may have to pay any CGT within the same 30-day period you have to declare your disposal. However, there are possible exceptions, such as being enrolled in Self-Assessment. If this is the case, then you can either pay the outstanding tax liability when you submit your Tax Return or on your normal payment date – the first 31st January after the end of the relevant tax year.

However, with all of the various different categories, rules and deadlines relating to CGT for non-UK residents, it can be confusing and difficult to know if your calculations are correct and when you need to submit payment by. Failure to report the sale of your property and pay any tax that’s owing can result in you receiving a penalty of £700 or 5% of any tax that’s due, whichever is greater.

Seeking specialist guidance and support, like the help that’s provided by our dedicated tax team, will guarantee that your CGT obligations have been established and calculated accurately and that you’ve fulfilled your HMRC obligations fully with minimum hassle and fuss.

If this post applies to you and you’d like a hand with any element of the CGT process, then please contact us on 01905 77600 or hello@ormerodrutter.co.uk.

National Minimum Wage increase: Are you paying the correct amount?

Every year, the Government increases the National Living Wage, which is also widely referred to as the National Minimum Wage.

At present, the rates, which determine the minimum pay per hour most employees are legally entitled to, look like this:

But come April 1, the current rates will increase to:

What does this mean for employers?

While the increase may be a standard UK-wide increase, there’s nothing standard about how it’s calculated, as there are several different variables, such as age and apprenticeship rules, involved.

As a result, some employers aren’t interpreting minimum wages accurately, with non-compliance resulting in them being penalised by the Government. Take major retailer, John Lewis, for instance, who reported in their 2017 Annual Report and Accounts that for some months, some of their workers had been paid less than the stipulated hourly rate:

‘We have identified that some of our pay practices, though designed to help Partners, have technically not complied with the National Minimum Wage (NMW) Regulations.

‘This has come about in the main because our pay averaging arrangements do not meet the strict timing requirements of the NMW Regulations; although Partners will, over the course of a year, usually have received the correct pay, in some months where greater than average hours are worked they will have been paid less than the hourly rate stipulated in the NMW Regulations.

‘The £36.0m exceptional charge principally relates to payments that are required to be made to recipient Partners and former Partners for the previous six years. We are now required to make good those amounts…’ 

While John Lewis may be at the larger end of the scale in terms of their size, this doesn’t mean that National Minimum Wage errors are only detected within bigger organisations. All companies of all sizes struggle to get these calculations correct each year and, as a result, they’re all at risk of being punished for failing to maintain compliance.

What should employers do?

It’s important businesses fully understand their National Minimum Wage obligations and what the correct associated payments are, as non-compliance can come at a real hefty price.

In February this year, the Department for Business, Energy and Industrial Strategy took the unprecedented move of naming and shaming more than 350 companies who had underpaid their workers. What’s more, as well as enforcing that all underpayments were made, HMRC also issued penalties in the region of £800,000.

With the Government really stamping down on National Minimum Wage offenders, it has never been so crucial for employers to make sure their payroll administration is accurate.

That’s where our PAYE health checks can help. They’re specifically designed to identify and rectify any potential PAYE (and VAT) problems before they’re picked up by HMRC. You’ll find out more about them in our blog, ‘Have your PAYE and VAT affairs been given a clean bill of health?’

While it may be tempting to assume your National Minimum Wage calculations are correct, it really does pay to get them checked by a professional – it’ll a) give you peace of mind that you don’t have anything to worry about and b) you won’t be appearing on the Government’s next named and shamed list.

To find out more about maintaining National Minimum Wage compliance or our health checks, contact us on 01905 777600 or hello@ormerodrutter.co.uk.

Autumn Budget 2017 Summary

Chancellor Philip Hammond presented the 2017 Autumn Budget against a backdrop of ongoing economic uncertainty. The Office for Budget Responsibility revised down its outlook for productivity growth, business investment and GDP growth across the forecast period.

The Chancellor announced a range of measures that will affect businesses and individuals, including the immediate abolition of stamp duty land tax for first-time buyers on homes worth under £300,000, and a rise in the tax-free Personal Allowance to £11,850 from April 2018.

Also unveiled in the Autumn Budget was a change to business rates revaluations: these will now take place every three years, as opposed to every five years, beginning after the next revaluation, currently due in 2022. The Chancellor also addressed the issue of the so-called ‘staircase tax’.

Our informative Budget Report provides an overview of the key announcements arising from the Chancellor’s speech. However, it also looks beyond the headline-grabbing measures, offering detail on the less publicised changes that are most likely to have an impact upon your business and your personal finances.

Additionally, throughout the Report you will find useful tips and ideas for tax and financial planning, as well as an informative 2018/19 Tax Calendar.

Don’t forget, we can help to ensure that your accounts are up-to-date and filed in a timely manner, as well as making sure that your profitability is kept to a maximum and your tax liability to a minimum.

Click here to download the our Autumn Budget 2017 Summary.

If you would like specific, one-to-one advice on any of the issues raised in the Chancellor’s Autumn Budget speech, please do call me on 01905 777600.

* Image by Twocoms / Shutterstock.com

Should conveyancers class search fees as disbursements?

It’s a tricky question and one that’s been attracting widespread interest and speculation as a result of the recent Brabners V The Commissioners for HMRC case.

This particular case has really caused a stir within the world of conveyancing as it questioned whether or not electronic searches should be classed as disbursements when charging conveyancing clients.

Brabners V The Commissioners – a quick case overview

Brabners argued that these searches should be classed as disbursements because they are conducted at their clients’ request and the search reports belong to their clients. All solicitors have historically treated this cost as a disbursement that’s incurred on behalf of the client, which means it isn’t subject to VAT.

However, HMRC challenged this practice by arguing that these searches form part of the overall service that’s provided by solicitors and should therefore be subject to VAT.

Last month (September), the judge concluded that search fees should not be treated as disbursements and are therefore liable for VAT to be charged. The decision was based on the fact that Brabners prepares separate reports on the search results and is therefore using the search information as part of its overall service. As a result, Brabners were liable to pay more than £68,000 in VAT.

What does the ruling mean for conveyancers?

Ideally, solicitors need to err on the side of caution. This particular case may potentially be appealed as it appears to directly contradict the principles previously agreed between HMRC and The Law Society.

The Law Society has stated that it’s currently considering the implications of the case findings and intends to provide solicitors with updated advice as soon as possible.

Until that guidance is given and a clear outcome has been reached, the best option for solicitors is to make sure they don’t treat search fees as disbursements. If they do, they run the risk of potentially becoming the next Brabners and having to pay thousands of pounds in unpaid VAT in the process.

If you’re unsure about what the recent ruling means for your business or would like some more advice about the situation, contact VAT Specialists on 01905 777600 or hello@ormerodrutter.co.uk.

VAT: Flat Rate Scheme Changes

HMRC has announced that, as from the 1 April 2017, all businesses using the Flat Rate Scheme or intending to use the Scheme will have to consider (in addition to the existing conditions) whether or not their VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period; or
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum, or proportion thereof (ie, £250.00 per quarter or (£83.33 per month).

If this criteria is met then the business will be regarded as a “limited cost trader” and MUST apply a fixed Flat Rate percentage of 16.5% to its’ VAT inclusive turnover.

All businesses using or considering using the Flat Rate Scheme should now review their status.

If you would like to discuss anything in this article please contact either David Pegg or Leanne Macgregor on 01905 777600

Pre VAT registration input tax claims – HMRC approach challenged

Have you been affected by HMRC seeking to restrict input tax claims on pre VAT registration costs?

A newly VAT registered fully taxable business has historically been allowed to fully recover VAT incurred in the following circumstances:

  • on services incurred up to 6 months prior to VAT registration and that have not been supplied on to a third party
  • on stock and assets purchased up to 4 years prior to VAT registration, to the extent that the goods or assets are still on hand at the date of VAT registration and are being used by the business (an apportionment may be required if some have been sold).

However, HMRC has recently been seeking to restrict VAT on qualifying goods and services by attempting to view the “use” of such goods or services over their useful, economic life, and dis-allowing, proportionately, any “use” of the goods, assets or services prior to VAT registration.

A number of businesses have received Assessments of VAT or have been instructed to amend their VAT returns.

This approach has been found to be incorrect and inconsistent with EU legislation and HMRC has now issued Revenue and Customs Brief 16 (2016) confirming that taxpayers who have been assessed or had their input VAT restricted in this way may now seek a refund.

Correcting Errors – Making a Claim?

If you need help with making an input tax claim, please contact us now.

Be warned there are time limits in place to correct errors, which are as follows:

  • 4 years from the end of the VAT period in which any adjustment was made; or
  • 4 years from the end of any VAT period Assessed by HMRC.

If you would like to discuss anything in this article please contact either David Pegg or Leanne Macgregor on 01905 777600.

The 2016 Autumn Statement: how will the announcements affect you?

On 23 November Chancellor of the Exchequer Philip Hammond gave his Autumn Statement to Parliament.

Our summary download provides an overview of the key taxation, business and financial measures announced in the Autumn Statement which could affect you and your business.

Significant announcements include an increase in the National Living Wage and National Minimum Wage rates, the implementation of the business rates reduction package and a freeze on fuel duty for the seventh consecutive year.

The Chancellor also announced a major change to the way fiscal events are scheduled; 2017 will see the final Spring Budget, as from that point on the main Budget will be held in the Autumn.

We supply far more than just the traditional tax and compliance services, and can advise on a comprehensive range of strategies designed to help you and your business.

For advice on any of the topics covered within the Autumn Statement, and how they may have an impact on your business or personal finances, please give us a call on 01905 777600.

Click on the link below to download
Autumn Statement 2016 Summary

Record number of apprentices join Ormerod Rutter

We have taken on our biggest cohort of apprentices this autumn, welcoming 15 accountancy and IT apprentices aged between 16 and 20 to our offices in Droitwich Spa and Bromsgrove.

The successful apprenticeship programme was launched in 2012 in response to a skills shortage across the sector.

Accounts manager Doug Marshall, who devised the scheme, said: “I created the programme with the intention of recruiting young, ambitious individuals who would become the future of our company. In the first year, we recruited five school leavers and the number of apprentices taken on has risen year on year.

“We believe the scheme gives talented youngsters the opportunity to fulfil their potential by offering full study support, mentoring on site and a vibrant working environment.”

We were named medium apprenticeship employer of the year at the 2015 Worcestershire Apprenticeship Awards and sponsored the advanced level apprentice of the year category at this year’s event, which was won by Pippa Dressler-Pearson.

For more information about the apprenticeship scheme and to apply for a place in 2017, email hr@ormerodrutter.co.uk

The Making Tax Digital consultation has ended…

On 7 November 2016 the Making Tax Digital (MTD) consultations came to an end. First outlined in the 2015 Budget, it is a move to transform the tax system to make it the ‘most digitally-advanced tax administrations in the world by 2020.’

The controversial plan is set to raise £1bn in additional tax revenue but there is criticism about the potential costs and administrative burden for businesses and individuals.

The six consultations that have taken place are:

  1. Bringing business tax into the digital age
  2. Simplifying tax for unincorporated businesses
  3. Simplified cash basis for unincorporated property businesses
  4. Voluntary pay as you go (PAYG)
  5. The tax administration consultation
  6. Transforming the tax system through the better use of information

There is also a separate overview for small businesses, self-employed and smaller landlords.

The consultation was initially planned to begin in April 2016, but was delayed until later in the year. With the reforms set to be introduced in 2018 businesses and individuals want to know how this will affect them going forward.

What we do know is that all unincorporated businesses and landlords with a turnover of less than £10,000 a year will be exempt.

Additionally, HMRC has said that it will delay the start of MTD for ‘some other small businesses’ to give them enough time to get used to the digital record keeping and submitting of quarterly updates. HMRC then goes on to say that they expect all tax returns to be done digitally by 2020.

With feedback from the consultation due before the end of January 2017, we are actively looking at any changes that may be implemented; and are here to help you during this transition.

If you have any questions or concerns about MTD please feel free to contact us at mail@ormerodrutter.co.uk or calling the office on 01905 777600.

Have you renewed your Fee Protection Insurance?

For those of you who have joined our Fee Protection Insurance scheme against the costs of dealing with an enquiry by the tax authorities, you should have received a renewal letter with the costs of the scheme for the next twelve months, and paid to rejoin.

The renewal date was 31 October 2016.

However, it is not too late to act if you haven’t already. Simply check the quote that should have been sent out to you and make the relevant payment or, if you cannot find the relevant paperwork, ask for a revised renewal quotation to be sent to you.

If you are not familiar with our fee protection insurance, here is a brief overview of the service.

Tax investigations can be intimidating, and with HMRC growing increasingly more powerful, an investigation into your affairs is more likely than ever – even if you’ve paid all your tax. Although we work hard to keep your tax affairs in order, compliance doesn’t necessarily keep you safe.

If you are unlucky enough to have your business investigated by HMRC then our expert team are on-hand to guide you through the process. Our knowledge and experience of dealing with HMRC at all levels will ensure you achieve the best possible outcome. Even if your records are in order and you have paid all your tax, the cost of preparing and presenting your case for investigation can be an unwanted and expensive overhead, which also why we also offer our clients Fee Protection Cover.”

Fee protection covers you for the costs of any compliance check we deal with on your behalf, regarding Income Tax, Corporation Tax, PAYE, National Insurance, CIS, IR35, VAT, National Minimum Wage, IHT and Child Tax Credit enquiries.

A copy of our service summary can be found here

The cost of our Fee Protection scheme is significantly less than the cost of a tax investigation. Is it really a risk worth taking?

If you have any questions about Fee Protection Insurance please feel free to contact us on mail@ormerodrutter.co.uk or by calling the office on 01905 777600.

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