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January 2018
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To January 2018’s Tax Tips & MYOB News.

We have interesting news this month (see article) as Priority software buy Acclivity.  Although based in Israel, Priority have offices in the US and Oxford!  Many of our MYOB users have moved to Acclivity AccountEdge, so we will keep you informed of developments.

We wish you a happy and prosperous New Year!

Personal Tax Returns
We still have capacity to handle a few more personal tax returns before the deadline of 31st January.

If you still need to get your tax return for 2016/17 sorted out, please fill in our online form and we will get back to you.
January 2018
· Employers Childcare Vouchers – last chance to set up a scheme
· VAT Returns under new Flat Rate Scheme Regime
· Consider a partnership
· Priority Software Ltd buys Acclivity
· January questions and answers
· January key tax dates
Employers Childcare Vouchers – last chance to set up a scheme
From 6 April 2018, employer childcare voucher schemes will close to new applicants. The government says that most working parents will now be able to benefit from their new ‘tax-free-childcare’ scheme instead. Unfortunately one key difference is that childcare vouchers were available for children aged up to 15 (16 if disabled) whereas the new scheme only helps for children up to the age of 11!

If you do wish to set up a scheme you can get one of the many employer childcare voucher providers to help you – for a fee.  Alternatively you can just set up your own scheme.  This is actually very easy – and we can help you with the paperwork. If you set up a scheme before April, your employees can continue to benefit whilst they remain with your company. 

These are the key points.
  • Workers need to be employed (rather than self-employed) to benefit from a scheme.
  • Employers can give employees (on basic-rate tax band) £55 per week or £243 per month in childcare vouchers.  This amount can be paid throughout the year and is free of tax and national insurance. This amount is halved for employees on the higher rate tax band.
  • Vouchers can be provided in addition to salary or via salary sacrifice
  • Both parents can get vouchers from their employers – giving the family up to £110 per week for childcare.
  • By offering a salary sacrifice scheme, employers save up to 13.8% of NICs, or £402 per employee per year. The total cost of the vouchers and any administration charge can also be offset against corporation tax.
  • Employees save the Tax and NI that they would have paid if this amount was part of their wages.
  • Childcare vouchers can be used to pay for nurseries and childminders, – after school clubs, holiday clubs, summer camps, out of school tuition and more. The childcare provider must be HMRC ‘approved’ (eg Ofted Registered).
  • Parents cannot use both tax-free childcare and childcare vouchers.
VAT Returns under new Flat Rate Scheme Regime top
Consider a partnership top
HMRC has introduced a 16.5% rate which was mentioned in our newsletter of May 2017.  This now means that the Flat Rate scheme (FRS) is pretty inaccessible to the bulk of service businesses that used to use it.  Let us see how the maths works.

Take a typical small VAT registered business.  It has a turnover of £100k.  Grossed up for VAT this is £120k of potentially VAT-liable cash.  It therefore has to register for VAT, but is well below the threshold at which it can apply for Flat Rate Scheme. See our Helpsheet.

Before, this business would have had to pay these lower rates.  The rate for a typical service business would have been 14.5%.  Therefore of the £20,000 VAT taken the business would pay over to the HMRC (ie £120k times 14.5%) £17,400 VAT annually.  It would be up to the business to decide if they could obtain a better deal by actually adding up all the VAT on their business costs and seeing if that were more than £2600.  This level of input VAT is pretty typical for a small business, so usually the business would opt for the flat rate scheme.

Now under the new regime the default rate for service businesses is 16.5%.  Therefore of the £20,000 VAT taken annually the business would pay the HMRC £19800 (ie £120k times 16.5%).  Now a business has to decide of the business VAT comes to more than £200.  £200!  This is nothing.  The VAT on the fees that Simple Accounting charges for a firm this size would also be about £200.  And usually a service business will be paying out for a myriad of other VAT-able charges.

All this means that the business will now have to come out of Flat Rate Scheme.  It may well still reclaim £2,600 VAT and therefore still pay the HMRC £174,00 annually.  The government ends up with no more VAT than before.  But now the business has to go through the aggro of accounting for all the VAT charged to it.  Which means a more detailed bookkeeping system and more difficulties with the quarterly reporting.  

From a government that prides itself on reducing burdensome regulation this is all a bit rich. 
Whilst forming a partnership can be an extremely flexible way for two or more people to own and run a business together, it is important to appreciate that under this type of trading vehicle, the partners themselves do not have individual protection. If one of the partners resigns, dies, or goes bankrupt, the partnership has to be dissolved, even though the business itself may not need to cease. Although there is no legal requirement to do so, it is highly recommended that, on forming a partnership, a formal partnership deed is drawn up. Many partnerships ask a solicitor to help with this, but it is possible for the partners to drawn one up themselves.
Read More
Priority Software Ltd buys Acclivity
Priority Software Ltd., an Israel-based provider of ERP solutions has acquired Acclivity LLC, developers of AccountEdge accounting software.  Acclivity was formed as the management buyout of MYOB in the US in 2008. Priority has its HQ in Israel with offices in the US, Romania and Oxford!

Around 45 Acclivity staff have joined Priority US including the founders, Scott Davisson and Tom Nash. The latter will both stay in the larger organisation in the role of MDs according to Davisson.
There is definitely a future for AccountEdge which will please existing customers. The product will continue to exist as a business unit under Priority US and the roadmap is being worked on. Priority will bring a depth of experience, especially in cloud that should help them develop a cloud solution.

In the UK and Ireland, AccountEdge is exclusively distributed by Mamut Software Ltd, a Visma company, however they only sell a mac based version.  Although that may remain the case in the short term, Priority are likely to take control of that distribution in time.  If so, this will be very good news for UK MYOB Users. In the meantime UK users can buy Acclivity Accountedge (Canada) online directly from Acclivity.
More Information

January questions and answers top
January key tax dates top
Q. I have recently bought a residential property to rent out. To enable me to purchase this property I took out a mortgage on my own home, but I did use all the money to buy the rental property. Can I claim tax relief for mortgage interest against my rental income? Answer

Q. I am an IT consultant and I provide my services via my limited company, which operates outside the IR35 rules. I started working on my current contract just over two years ago – although when I started, I did not know that it would last this long. Do the temporary work place rules on allowable expenses apply in this situation? Answer

Q. How is an estate valued for inheritance tax purposes? Answer
14 – Return and payment of CT61 tax due for quarter to 31 December 2017

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/1/2018 or quarter 3 of 2017/18 for small employers

31 – Deadline for filing 2017 Self Assessment personal, partnership and trust Tax Returns – £100 first penalty for late filing even if no tax is due or tax due is paid on time

– Balancing self assessment payment due for 2016/17
– Capital gains tax payment due for 2016/17
– First self assessment payment on account due for 2017/18
– Interest accrues on all late payments
– Half yearly Class 2 NIC payment due
– Further penalty of 5% of tax due or £300, whichever is greater for personal tax returns still not filed for 2015/16
– 5% penalty for late payment of tax unpaid for 2015/16 self assessment

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, Solar Accounts, Quickbooks or Clearbooks.

‘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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