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April 2022

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To April's Business Companion News.

This month's newsletter follows up some of the issues covered in Rishi Sunak's Spring Statement two weeks ago.

April 2022
· Directors – Salary & Dividends 2022/23
· Superdeductions
· Fuller Statement of Results at Companies House
· Is the QCB deferral worthwhile?
· April Questions and Answers
· April Key tax dates
Directors – Salary and Dividends 2022/23 top

The tax free allowance remains at £12,570 for 2022/23.

The threshold for payment of Employer’s NI (‘secondary threshold’) remains at £9,100 per person in 2022/23, however the rate has increased to 15.05%. 

The rate of Employee NI is going up now to 13.25%.  The Employee NI Threshold (‘primary threshold’) is currently £9,880pa and increases to £12,570 per person in July 2022. 

The Employment Allowance goes up to £5,000 per annum from April.  

The dividend tax-free allowance remains at £2,000 in 2022/23, so it is always worth paying a dividend for this amount if you can.

Sole Directors
If you’re the sole director, the best salary to pay yourself is £9,100 per annum (or £758.33 a month). This is because:

  • A sole director cannot claim the Employment Allowance.
  • It is at the secondary threshold so your company won’t need to pay employer’s NI on it.
  • This salary is lower than the primary threshold, so you won’t need to pay employee’s NI.
  • It is above the Lower Earnings Limit, so you will still earn NI credits.
  • It is less than the tax-free Personal Allowance threshold, so you don’t pay income tax.

Two or more directors
You are eligible to claim the Employment Allowance if you have two directors (or one Director and one employee) both paid above the secondary threshold (£9,100pa or £758.33 a month ). 

This means that the point at which you start paying employee’s NI will be £9,880 until July 2022, when the threshold increases to £12,570. Over the year, the optimum salary in a company with two or more directors is £11,908pa each (£992.33pm).

This is because two or more directors can take an annual salary up to the primary threshold without needing to pay employee’s NI, and then claim the £5,000 Employment Allowance to cover the portion of employer’s NI they would otherwise incur.

Superdeductions top
Fuller Statement of Results at Companies House top

In the recent Spring Statement the Chancellor again mentioned the ‘Superdeduction’.  This refers to the 'super-deduction allowance' which enables companies investing in qualifying new plant and machinery assets (not cars) to claim:

– a 130% super-deduction capital allowance on qualifying plant and machinery investments
– a 50% first-year allowance for qualifying special rate assets

Is this the big deal that the Government would have you believe?  I’ve checked again about the value of these.  If you claim a £10000 cost of equipment now you would get 130% of this cost allowed against your tax bill.
If you were to claim the cost this year: Superdeduction:  130% x 10,000 x 19% CT = £2470 tax saved.
If you were to have claimed it last year (ie before 1/4/21): Annual Investment Allowance: 100% x 10,000 x 19% CT = £1900 tax saved.  
This is only £570 better.  The difference is effectively 5.7% more off the £10000. So not very ‘Super’.  

Now next year the ‘Superdeduction’ ends.  So if you were to buy and claim the cost next year (ie 23/24) would this be a tax disaster?  
Now from next April we will be back to the Annual Investment Allowance again.  The calculation depends on the rate of CT you will pay, 25% or 19%.  
For successful companies: 100% x 10,000 x 25% CT = £2500 tax saved.  This is £30 better than under the Superdeduction.
For less successful companies: 100% x 10,000 x 19% CT = £1900 tax saved.  This is £570 worse.

The implication is that you shouldn’t rush to buy equipment before the end of the Superdeduction. Don’t let the word ‘Super’ influence your decisions!

A little noticed proposal associated with the recent Spring Statement is to reform Company filing requirements at Companies House.  There will be provisions for reductions in filing deadlines.  Also:
    Small companies will no longer have the option to prepare and file abridged accounts and will be required to file both their profit and loss account and directors’ report, ie, the option to file ‘filleted’ accounts will be removed.
    Micro-entities will also be required to file their profit and loss account but will continue to have the option to not prepare or file a directors’ report.
    Dormant companies will be required to file an eligibility statement
    All companies (including the fussy accounts prepared by incorporated charities), will be required to file accounts digitally, with full tagging.

We support several of these changes, although not the final one.  In particular our practice is that we like to show a series of complete records at Companies House.  There can then be clarity about how the Company is doing.

Our usual/default policy is full disclosure of the profit and loss.  
This means showing your turnover and margin.  This also means that your company’s total dividends in a year are shown. If you object to this you have two options (at least until these reforms bite):

No dividends.  We show the P&L but not the dividends at the bottom.  We suppress the dividends elsewhere in the accounts.  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.  But if this is what you want – please drop us a line to confirm ‘No Divis’.

No P&L.  There are also some clients who want to suppress their P&L to hide their turnover.  If you are adamant that you do not want to show your company dividends, even indirectly, then realistically we would have to suppress your entire P&L.  If this is you – please drop us a line to confirm ‘No P&L’.

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.  As standard we do not show the final two detailed breakdown pages of your company accounts when they are shown at Companies House.

Is the QCB deferral worthwhile?

When a company is sold, it is often partly for consideration which is deferred in one way or another. Sometimes this will take the form of a debt, such as loan notes. Effectively, the vendor is lending the purchaser the balance of the consideration. If certain conditions (set out in s.117 TGCA 1992) are met, the loan notes will be "qualifying corporate bonds".

Read More
April Questions and Answers top
April Key tax dates top
Q1. Our long-term landlord has offered us the opportunity to purchase the freehold in the office building we work from, which we are keen to do. However, they have opted to tax the building. I’m aware we could recover the input tax but it will still have a short-term negative impact on our funds. Is there any way to avoid incurring it in the first place? Answer

Q2. I am a shareholder in a family-run trading company. Last year I purchased a hybrid car via the company. The relevant BIK percentage is 14%. With the recent increase in fuel prices, I am considering having the company purchase the fuel for the car and reimburse it for the private fuel without incurring a benefit in kind? Currently I don’t claim anything as business journeys tend to be covered by the battery range. Answer

Q3. We have an employee currently seconded from our EU-based parent company. Initially, she was due to be with us for 18 months, of which twelve have already passed. We are paying for a flat for her on the basis that it is a temporary workplace, so not taxable on her. We are considering extending her stay for a further 18 months, as she has had a very positive impact. Are we able to continue paying the rent on the flat tax free until two years has elapsed? Answer
1 – Due date for payment of Corporation Tax for accounting periods ending 30 June 2021

5 – Last day of 2021/22 tax year, deadline to use any allowances, e.g. ISAs, CGT annual exemption etc.

5 – Deadline for registration for payrolling of benefits in kind for 2022/23

7 – Electronic VAT return and payment due for quarter ended 28 February 2022

14 – Deadline to file CT61 for Q/E 31 March 2022

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/4/2022

30 – ATED return and payment for 2022/23 due

30 – Last date to pay self-assessment liability for 2020/21 without incurring daily penalties (note that the daily, and 6 and 12 month penalties were not affected by the reprieve for automatic £100 penalties)

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

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

‘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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