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Welcome…
To May’s Tax Tips & MYOB News, our monthly e-newsletter.
CONTACTING US – We are working in Canada until June 7th. If you need to contact us please , or ring us between 1pm and 4pm UK time (our phone is redirected at our expense).
A Quick Personal Tax Return?
If you’d like us to do your Personal Tax Return
just put your self-employment details and property rental details into our online tax return questionnaire. Have you made any capital gains or received other sources of income? We know about director fees and wages that you pay through our payroll arrangements and your company dividends. So no need to tell us about those. You can complete the questionnaire as soon as you like for an early tax return.
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Workplace Pensions – Future Contribution Rates
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| VAT Flat Rate Scheme – Changes from April 2017 |
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Workplace Pension schemes must be set up for all employers by February 2018. Check your staging date. Some director only companies will be exempt.
We have chosen to use the Peoples Pension for our clients. Advantages over alternative providers include lower charges for staff and the fact that there is no lock in, so staff can move funds to a different scheme if they change jobs. The Peoples Pension is part of B&CE, a not-for-profit financial services company originally set up for workers in the UK construction industry.
Government Minimum Contribution Levels
The Pensions Regulator (a Government agency) sets minimum contribution levels and these will increase over the next two years.
The current total minimum contribution set by the Pensions Regulator is a total contribution of 2% with at least 1% employer contribution. And this minimum is based on ‘Qualifying Earnings’ only – the band of earnings between £5,876 and £45,000 a year (for the 2017/18 tax year). The Pensions Regulator has divided the workforce into different categories – with only those between the ages of 22 and Statutory Pension Age and earning above £5,876, or those outside that age range earning above £10,000, eligible to the minimum employer contributions.
In April 2018 the minimum contribution rates will go up to 5% (of which at least 2% must be paid by employers). In April 2019 the minimum rate will increase to 8% (of which at least 3% must be paid by employers).
Our Scheme Contribution levels
We have chosen initially to pay eligible staff a rate of 2% employer contributions with no employee contributions. Read More
We will be discussing future contribution levels with our Business Companion clients over the next few months. Employers will need to decide if they will just pay the minimum or a higher rate of contributions for their staff.
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The VAT flat rate scheme (FRS) is used by many small businesses to help simplify their VAT reporting obligations. Businesses could often gain a cash advantage from using the scheme, but this advantage has been reduced from 1 April 2017, particularly in relation to service-related businesses. Whilst the FRS continues to operate, many businesses will no longer find it economical to use.
The FRS is a simplified VAT accounting scheme for small businesses, which allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. When using the FRS, the business ignores VAT incurred on purchases when reporting VAT payable, with the exception of capital items which cost £2,000 or more. If the business incurs few expenses, and it operates in a sector with a relatively low FRS percentage, it will pay out less VAT to HMRC under the FRS than it would outside the scheme. .
Common percentages used by service-related businesses in recent years include:
Accountancy and legal services 14.5%
Computer or IT consultancy 14.5%
Estate agents and property management 12%
Management consultancy 14%
Business services not listed elsewhere 12%
However, from 1 April 2017 a new 16.5% FRS rate applies for businesses with limited costs (see below). Since the rate of 16.5% of gross turnover equates to 19.8% of the net, the result is that there will be almost no credit for VAT incurred on purchases. Many businesses, particularly in the trade sectors listed above, are likely to see a significant rise is VAT payments.
A ‘limited cost’ business is defined as one whose 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 £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).
Practical Tip – Businesses who are trading under the VAT threshold (£85,000 from 1 April 2017) may consider deregistering from VAT. Businesses who are trading over that threshold may wish to withdraw from the FRS. tax.
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The End of Making Tax Digital (MTD)?
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The government’s heralded Making Tax Digital Programme was to commence in April 2018 with new hefty reporting requirements for the self-employed and landlords with turnover above the VAT threshold. However as soon as Theresa May announced plans to call an election, it was immediately obvious that vast swathes of the Finance Bill 2017 (FB17) would be deprioritised.
Indeed, almost overnight what had promised to be a mammoth Finance Bill, consisting of 762 pages, had been slimmed down to around 140 pages, a reduction of more than 80% (by volume). As part of this weight-loss-programme, all of the MTD clauses without exception simply disappeared.
So, where does MTD go from here?
We think the most likely post-election scenarios for the future of MTD are as follows:
– If the current Government is returned with a solid majority, the dropped clauses are likely to be inserted wholesale into an early-summer Finance Bill.
– If the current Government is returned but in a weaker state, MTD is likely to proceed, but possibly on a slower track and not necessarily in the way set out now.
– If the current Government is not returned, or enters a coalition, then MTD could change beyond all recognition.
Watch this Space!
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| National Minimum Wage (NMW) and National Living Wage (NLW) |
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| May questions and answers |
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The government has permanently moved annual NMW rate changes from 1 October to 1 April; this has been done so they align with NLW changes. The next revisions will occur on 1 April 2018 but the 2018/19 NLW and NMW rates should be known by December 2017 at the latest.
The national living wage (NLW) and the four national minimum wage (NMW) rates all increased as of 1 April 2017:
• NLW [25 and over] will rise by 30p from £7.20 p.h. to £7.50 p.h.
• adult NMW rate – [21 to 24] – have risen from £6.95 p.h. to £7.05 p.h.
• NMW rate [18 to 20] have risen from £5.55 p.h. to £5.60 p.h.
• NMW [16 to 17] have risen from £4.00 p.h. to £4.05 p.h.
• Apprentice rate have risen from £3.40 p.h. to £3.50 p.h.
Statutory rates.
• statutory sick pay (SSP) have risen from £88.45 to £89.35 p.w. ; and
• statutory maternity pay (SMP), statutory paternity pay (SPP), statutory shared parental pay (ShPP) and statutory adoption pay (SAP) – have risen from £139.58 p.w. to £140.98 p.w.
So check your current month salary hourly rates – is there anyone who needs a payrise? For more details have a look at our Business Helpsheet: (note you will have to login to view this – try your email address and p/w ‘accountant’ )
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Q. My company owns a car which is used during the day by various employees for business travel only. However, since there is no overnight parking facility at our business premises, one of my employees takes the car home each night and parks it outside his house. He does not use the car privately. Am I correct in assuming that no taxable benefit arises?
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Q. My elderly mother-in-law has an income of around £18,000 a year, which is made up of state retirement pension, widow’s pension and attendance allowance. Should she be paying any income tax on this?
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Q. I recently entered into a contract to sell my former trading premises. The sale agreement was unconditional, with a deposit being paid by the purchaser of £25,000. The balance was due to be paid in two equal annual instalments. However, the buyer has now told me that he has fallen on hard times and will not be able to proceed with the purchase. Under the terms of our agreement, he has forfeited his deposit and I have therefore kept this money. Can you please confirm the capital gains consequences of this?
Answer
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 19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/5/2017
31 – Deadline for copies of P60 to be issued to employees for 2016/17
New tax calendar
We now have written up the deadlines that your business faces for the forthcoming year:
Tax Calendar
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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.
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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.
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Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Wave, Quickbooks or Clearbooks.
‘All clients using these software packages can benefit from our support. Visit our website http://www.simpleaccounting.co.uk for a look at the resource on offer.’
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