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April 2021

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To April’s Business Companion News.

Paying Your Corporation Tax? Get the Reference Right! 
Corporation Tax is due nine months after the end of the accounting year, but there is no penalty if it is a little late (the CT return is not due until 12 months after the year-end!)

HMRC Payment Details:
– Account number: 12001039
– Sort Code: 08-32-10
– Account Name: HMRC Cumbernauld
– Payment reference: see payslip at the bottom of the payment letter from HMRC or just and we can find it for you.

Beware: you must use the correct reference otherwise HMRC may allocate the payment to the wrong year. And note that these bank details are also the same as used for PAYE – different ref!
April 2021
· Latest news round up
· Accounts Presentation at Companies House
· Dealing with an overdrawn Directors Loan Account
· The New Array of Tax Credits
· April questions and answers
· April key tax dates
Latest news round up top

The Budget finally took place on 3 March 2021. None of the speculated tax changes, e.g. raising CGT came to pass, although the main rate of corporation tax will increase in 2023. Several allowances, such as the personal allowance and CGT annual exempt amount have been frozen until April 2026. Further detail of the Budget announcements were included in our Budget newsletter.

Read More
Accounts Presentation at Companies House
Dealing with an overdrawn Directors Loan Account top
We need to be able to argue for the value in any client firm in the event that they need to sell in a hurry.  This protects you, and the business itself should you be suddenly gone.  Therefore we like to show a series of complete records at Companies House.  There can then be clarity about how the Company is doing.

As standard we do not show the final two detailed breakdown pages of your accounts when they are shown at Companies House.  However apart from this our usual policy is full disclosure.  

We are generally compelled to show the notes and policies to the accounts.   The only exception would be if we had a detailed related party note in an FRS 102 set.  

Generally we want your profit and loss to be shown.  This means showing your turnover and margin.  This does mean that your company’s total dividends in a year are shown.  We could suppress the dividends line.  But there is not much point in showing the P&L and not declaring the dividends.  Anyone seeing the P&L and not seeing the dividends, can work out them out from the reserves movement anyway.  

If you are adamant that you do not want to show your company dividends then realistically we would have to suppress your entire P&L.  There are also some clients who want to suppress their P&L to hide their turnover.  If this is you – please drop us a line to confirm.
Many companies use 31 March as the accounting reference date. As such, now is a good time to review the position of directors’ current accounts for close companies.

It is a common misunderstanding that if the company charges a commercial rate of interest on any loan made to the participators or employees there are no tax consequences. In fact, whilst doing this does protect against a benefit in kind arising, there is a further consideration for the company.

Read More
The New Array of Tax Credits
The government has created a wide range of special tax breaks against Corporation Tax, partly as a prelude to increasing the main rate for the first time in many decades.  The ways these work is a little complex, particularly as there are a variety of rates involved.

Example: Research and Development

So say you pay out £12,000 on a cost for a development project incl VAT. You obviously get the £2000 VAT back from your next return.
Then you get 230% of the net cost against your Corp Tax bill.  This means that the normal 19% relief effectively increases to 43.7%.  So you currently get another £4370 off the CT bill.  
Your £12000 outlay has only cost you £5630.  
Using similar logic if you spend £12000 on internal R&D staff it only costs you £6756 (because there is no vat relief on salaries).

Effective cost of £12000 (gross of VAT) spent on:
(For a company currently paying 19% Corp Tax.)
Usual day to day expenditure subject to VAT
R&D       230%  revenue (100% + 130% inc VAT)    £5,630 
R&D performed by an agency or university (100%+65% inc VAT) 
Subcontractor or Third party staff (100%+65% inc VAT) £6,865 57%
R&D (internal Staff cost £12k but no VAT relief 100%)
£6,756 56%
Equipment to £100k AIA anytime before 31.12.21 
£8,000 67%
Super deduction Plant & Machinery to £1m between 1.4.21 and 31.3.23 130% £7,530 63%
Orchestra relief (Assuming full VAT relief on costs 100%+80%) £6,580
Orchestra relief (Assuming no VAT relief on costs 100%+80%) £7,896 66%


The recent budget will change Corp tax rates for those paying above £50,000 CT from 2023.  If R&D rules remained unchanged the 47% net cost above could decrease to only 43% from 2023.

Upshot is that the R&D credit for internal costs (especially if they are subject to VAT) remains the most attractive tax break to go for.  These are costs that you definitely do not want to be paying personally or in any way outside the VAT or Corp Tax systems.  The second most attractive tax break is to run an orchestral event.
April questions and answers top
April key tax dates top
Q. Our company uses the cash accounting scheme. We’ve lost a lot of trade as a result of Brexit and Covid-19 and we’re looking to sublet part of our warehouse. We have opted to tax this. We want to raise a single invoice at the end of each financial year (31 March) for the year ahead. However, we’re happy for the tenant to pay the rent (and VAT) in monthly instalments. Is this permitted under the cash accounting scheme? Answer

Q. I am 60 but still working. I have therefore avoided touching my various pension pots (which I still contribute regularly to) until recently. Last year, my son’s business was struggling with the effect of lockdown so I withdrew £9,500 – intending to stay within the “small pot” rules. However, my accountant is now saying I can only contribute £4,000 each year to my pension. This could seriously affect my aim of retiring in two years as I have been paying in £25,000 each year. Is he correct? Answer

Q. My company bought a retail premises 18 months ago and I am VAT registered. I now want to let the flat upstairs to a residential tenant. Do I need to charge her VAT? Answer
6 – Large and medium sized businesses in private sector become responsible for applying IR35 rules

7 – Electronic VAT return and payment due for quarter ended 28 February 2020

14 – CT61 quarterly deadline for Q/E 31 March 2021

15 – Claim deadline for employers for furlough days in March.

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/4/2021

30 – ATED returns due

Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Quickbooks, Xero or Freeagent.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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