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August 2021

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To August’s Tax Tips & News, our monthly newsletter designed to bring you tax tips and news. 

Summer Work Parties
Don’t forget that HMRC allows your company to spend up to £150 (in total) per staff member on annual parties. With coronavirus most staff missed out on a special Christmas Works Do, so maybe it’s time to plan a  Summer Barbeque or Day at the Races? 

You don’t need to report to the HMRC is as long as it is: £150 or less per employee (per year), and open to all your staff.
August 2021
· Latest news round up
· R&D Tax Credits now less Generous
· Hospitality VAT Flat Rate Scheme
· Tax-Free Childcare and summer activities
· August questions and answers
· August key tax dates
Latest news round up top

From 1 August the government contribution will fall to 60%, meaning the employer will need to pay 20% to ensure the employee receives their entitlement of 80% (subject to a £2,400 per month). This will remain in place until the end of September when the scheme is set to close.

HMRC published new guidance for those who have received SEISS grant payments last month. The guidance covers situations where the SEISS income may not have been correctly reported on the self-assessment return. The income needs to be reported in specific boxes on the return, and HMRC are automatically correcting returns where the amounts in these boxes do not match the taxpayers’ SEISS record.
Read More
R&D Tax Credits now less generous
Hospitality VAT Flat Rate Scheme
Since April a new R&D SME tax credit PAYE cap has been in force. As usual with the HMRC they claim that this is to curb fraudulent claims.  The cap will limit the payable R&D tax credit to £20,000 plus three times the total PAYE and NIC liability of the company for the year.  Companies claiming more than £20,000 may have to reconsider their remuneration strategies.

The R&D claim
A robust claim will need the following:

  •  Assessment of eligibility
  •  Identification of R&D activity: Identifying R&D activities (using BEIS guidelines) on the meaning of R&D for tax purposes,
  • Accurate descriptions of projects, project aims and activities
  • Identification of eligible expenditure: confirming qualifying expenditure;
    ensuring non-qualifying cost categories are excluded;
  • Analysis of externally provided workers and subcontractors at lower rate
  • Calculation of staff costs including employer NI and pension.
  • Calculation of the claim
  • Supporting the analysis:ensuring sufficient supporting analysis or records,
  • staff time to show where allocations have come from, correct allocation of costs between project periods and return periods.
The reduced rate of VAT of 5% to the hospitality, holiday accommodation and attractions sector is extended until 30 September 2021. After this date, the VAT rate will be 12.5% to the end of 31 March 2022, before returning to the standard rate of VAT of 20% from 1 April 2022.

The related lower flat rates under Flat Rate Scheme (FRS) will also increase to 8.5% for cafes and takeaways, 4% for pubs and 5.5% for hotels (currently 4.5%, 1% and 0% respectively).

What’s interesting is that the first and second of these ratios are much higher than you would expect given the original 2019 FRS rates of 12.5% for cafes and takeaways, 6.5% for pubs and 10.5% for hotels.   Is this a good time to leave FRS for smaller businesses in these sectors?
Tax-Free Childcare and summer activities top
HMRC has issued a reminder to working parents that Tax-Free Childcare (TFC), the scheme the government phased in between 2017 and 2018, is not just for “traditional” childcare costs, such as regular hours after school during term time. It’s also possible to use the account to pay for things like accredited clubs or sports activities over the summer.
Read More
August questions and answers top
August key tax dates top
Q1. My partner has been suffering with “long COVID” for several months, and unfortunately has had to leave her job as a result. As our son is in his second year of university, we can’t really afford the drop in income, and so I am taking a second job. The hours will vary, but I am certain that the additional income will push me into the higher rate tax band for 2021/22. I have heard that the NI contributions I pay should be capped as a result, but I’m not sure how to go about securing this. Do I need to make a claim? Answer

Q2. I am very keen on investing in entrepreneurial companies, and over the years have made several investments that qualified for the EIS. Two years ago, I made such an investment, and three months later gifted half of the shares to my wife. Unfortunately, we have recently separated (amicably) and are managing our own straightforward divorce. She has mentioned the possibility of selling the shares I gifted to her, but the minimum holding period has not expired. Will I be subject to income tax relief clawback? Answer

Q3. I am a builder who is registered for the CIS. The vast majority of my work is as a subcontractor for a number of large companies. I am VAT registered and so have been subject to the new reverse charge rules since 1 March 2021. However, the changes combined with a downturn in work due to COVID-19 has seriously affected my finances. Could I use the Cash Accounting Scheme to help with this? Answer
1 – Due date for payment of Corporation Tax for accounting periods ending 31 October 2020

2 – P46 (Car) deadline for quarter to 5 July 2021

7 – Electronic VAT return and payment due for quarter ended 31 June 2021

16 – Claim deadline for employers for furlough days in July

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/8/2021

31 – Last date to submit PSA figures to HMRC in order to be advised of payable amount by payment deadline in October

Need Help? top
New Clients Welcome top
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