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Welcome…
To May’s Tax Tips & MYOB News from Simple Accounting Ltd
Contacting our Payroll Service
Just to remind you that from now on you need to send monthly pay details to Callum Moore at , direct line: 01422 887012.
Phoning HMRC
One of our services for clients is to phone HMRC on their behalf to sort out problems. However sometimes this isn’t possible, for example when an agent authorisation hasn’t been completed.
If you need to phone HMRC don’t despair! Phone the Employers’ Helpline on 0300 200 3200, and only phone at their quiet times: weekdays 8-8.30am or 6-8pm, or Saturday mornings. If their automated messages drive you mad, just stay silent and you should eventually be put through to a real person.
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As personal
information becomes more regularly shared and businesses now hold huge
volumes of customer data, there is a need for management and control
over what businesses can do with that information.
The General Data Protection Regulation (GDPR) is a new regulation in EU law on data protection and privacy for all individuals within the European Union. The GDPR aims primarily to give control to citizens and residents over their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU. The GDPR regulation will be implemented on 25 May 2018.
GDPR gives regulators the ability to apply large fines of up to 20m Euro or 4% of global annual turnover – whichever is higher, for non-compliance. As such, businesses need to take these new regulations seriously and will need to implement changes to the way they operate, depending on the type of personal data that they hold. This will include customer records, databases and CRM systems..
What do you need to do?
– All people handling personal
information within an organisation must be trained and controlled to
behave responsibly with that information.
– Firms will need to ensure that they have appropriate policies and procedures in place with regard to any personal data that they hold or process.
– We recommend you review supplier contracts to ensure that these contracts are GDPR compliant.
– Your recruitment and HR policies and procedures should be reviewed to ensure that personal data is managed in a way that is compliant with GDPR.
– Follow the link for specific advice on Social Media.
– Consider whether you need to registration with the ICO – see below.
Registration with the ICO (Information Commissioner’s Office)
Companies that process personal data should register with the ICO, except where the use falls within the exemptions under the Data Protection Act. There are exemptions from registration for:
1. companies that process personal data only for:- staff administration (including payroll);
- advertising, marketing and public relations (in connection with their own business activity); and
- accounts and records;
2. some (smaller) not-for-profit organisations;
There are also exemptions from data protection for:
- personal data that is processed only for research, statistical or historical purposes;
- personal data relating to an individual’s physical or mental health; and
- personal data that consists of educational records or social work.
There is an almost total exemption from the Data Protection Act for individuals who just use personal data for their own domestic and recreational purposes.
If you need to register with the ICO you can easily do this online on their website. The cost of your data protection registration depends on your size and turnover, but for most businesses it costs £35.
How can Simple Accounting Ltd help
We will be writing to all our clients over the next few weeks to:
– Advise each business whether they need to register with the ICO.
– Provide draft Data Protection policies which are GDPR compliant and can be tailored for each company to use.
– Provide detailed steps that need to be taken to satisfy the new GDPR requirements.
If you need more help with GDPR just contact us. We will advise you as part of your Business Companion Service. Please DO NOT accept help from one of the latest batch of middle men offering an unnecessary ‘GDPR solution’!
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IR35 Victory for the Taxpayer
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| Tax Efficient Extraction of Profit from Companies for 2018/19 |
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In our February newsletter we reported the Tax Tribunal decision involving Christa Ackroyd, a TV presenter, and her company, which was set up to supply her services to the BBC. It was held that the IR35 personal service company rules applied to the arrangements.
However in a more recent case involving a night manager on a building site, another tribunal decided that the IR35 rules did not apply. The facts of the recent case involve a Mr Daniels supplying his services via his company, MDCM Ltd. One of the key factors used to determine Mr. Daniels’ status as a contractor, rather than an employee, was that he was not entitled to receive any employment benefits like holiday pay, sick leave, compensation for travel expenses, or a notice period. For the IR35 rules to apply it must be inferred that under the hypothetical contract between “worker” and client that worker would be regarded as an employee if directly engaged. There are numerous issues taken into account, but the issue is often decided by the extent to which the “worker” is regarded as being under the control of the client.
Please contact us if you wish to discuss whether these recent cases impact on your particular circumstances.
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The new tax year means that many directors of family companies will be considering the most tax efficient method of paying themselves. We normally recommend £702 per month (pm) as salary and £167pm as dividends. This comes to £10424 per annum (pa). But for co profits greater than £10424 per director/shareholder pa the calculation is a little more complex.
For many years accountants and tax advisors have suggested that director/shareholders should extract profit by paying themselves a low salary with the remainder of their income being extracted in the form of dividends. Although dividends are not deductible in arriving at the company’s taxable profits, they do not normally attract National Insurance Contributions (NICs). The starting point for NICs rose to only £162 a week from April. This is now significantly lower than the £11,850 annual personal income tax allowance. A salary just below £162 a week, £702pm, £8,424 pa, would mean no NIC would be due, but would still be sufficient to count as a qualifying year for State Pension purposes.
Remember that employers are entitled to a £3,000 Employment Allowance(EA) (where the director is not the only employee); this can be set against employer’s NICs. If this has not been utilised against NICs on staff wages then consider increasing the directors’ salaries up to £11,850. The additional salary will save corporation tax at 19%. So if you take £3,426 extra salary the CT equals £651, whereas the employees NIC is a cost of only £411.
As far as the level of dividends is concerned, the rate of tax increases from 7.5% to 32.5% at £46,350 so ideally the dividends should not exceed £34,500 if a salary of £11,850 is paid. The first £2,000 would be taxed at 0% with £32,500 being taxed at 7.5%. Don’t forget that this tax will then be due on 31 January 2020.
So therefore we normally recommend a salary of £702pm (£8424 pa). Then make sure that you pay a dividend of £2,000pa. If your company qualifies for EA have few other staff, and you have no other earnings, we recommend a higher salary of £988 pm. Beyond this we usually recommend that you pay yourself in the form of extra dividends.
If you are beyond retirement age then Employee NI is not payable. If you employ someone other than retirement age director then EA should be available to offset the Employer NI. In which case firstly pay the £702pm, then the £167pm dividend and then pay salary (which incurs 20% personal tax, but will save an offsetting 19% CT for your company).
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Helpful Email Subject headings
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We have had a few instances lately where we have delayed opening urgent emails from our clients, because we didn’t think they were important.
To help us please use meaningful subject headings. Writing subject lines can be tricky, but you should always include one. The goal is to summarise the message without being too wordy or too vague. Long subjects tend to be skimmed or ignored, and they don’t always fully display in e-mail viewers. For best readability, use sentence case for subject lines rather than all caps.
And importantly don’t just find the last email we sent you and press reply if your email is now about a completely different subject!
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| May questions and answers |
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Q. I own a rental property, which has a mortgage on it. The mortgage is currently on an interest-only basis. Given the new interest relief restrictions on landlords’ finance costs, should I consider switching to a repayment mortgage?
Answer
Q. My grandmother died on 3 May 2017. Her estate on death includes 12,000 ordinary shares in XYZ plc, a company listed on the London stock Exchange. The closing prices at the date of her death showed a bid price of 989p per share and an offer price of 993p per share at the end of that day. Recorded bargains on that date were listed as 970p, 980p, 983p, 989p, 993p, and 996p. How is the value of the shareholding calculated for inheritance tax purposes?
Answer
Q. I am thinking of buying a property in England to rent out. Will I be able to offset the legal fees, stamp duty land tax, and deposit costs against the rental income I hope to receive?
Answer
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 19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/5/2018
31 – Deadline for copies of P60 to be issued to employees for 2017/18
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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, 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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