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May 2023

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To May’s Business Companion News.

Use the correct HMRC Payment reference!
Whichever tax you are paying, make sure you use the correct reference to make sure that your payment is allocated to the correct tax for the correct period. If you use the wrong payment reference, or even worse no reference at all, HMRC may lose your payment or allocate it in a way you were not expecting.  And it may be very difficult to correct later.

See this helpful section on paying taxes from our website.

May 2023
· Last MYOB/ Acclivity Upgrades avoiding subscription
· Planning for retirement
· VAT Penalty Notices
· Why do we need to keep receipts?
· May Questions and Answers
· May Key tax dates
Last MYOB/ Acclivity Upgrades avoiding subscription top
There are relatively few options for MYOB users now, and one of them is about to be shut off.  This is because the available upgrades are shortly to become subscription only.  This is the last year (2023) that  AccountEdge will be available as an outright purchase, and then only as a Canadian PC version. If you take this opportunity and upgrade you will have no ongoing service charge payments and no further confirmation procedures or codes will be needed. 
Here is the test drive for Acclivity AccountEdge 2023 (PC).  Note: you will need to complete our form first.

Your first decision is whether you want to continue on MYOB, Acclivity or AccountEdge.  There are significant problems relying on a 32 Bit software that will not be rewritten.  This means that the software will always have a restriction – it isn’t very fast when you use it multiuser.  

For business–critical databases we recommend that you no longer rely on us to calculate confirmation codes.  So please use the next few months to convert, while this option is still straightforward. We will help with the installation and training if you upgrade by 1st September 2023.  

For more information on what to do next, follow these links to the MYOB User Group website:
PC Users 
Mac Users 

If you need extra help just .
Planning for retirement top
VAT Penalty Notices top
On 6 April 2023, the pensions annual allowance increased from £40,000 to £60,000, and the pensions lifetime allowance was effectively abolished (for Money Purchase/ Defined Contribution Schemes). You can now contribute far more to your pension funds each year, and so can your employer. Any unused annual allowance can also be carried forward up to three years.

This freedom to contribute also applies to those with large pension savings who have fixed protection on their pension pots, to stop the lifetime allowance charge from applying. Now the lifetime allowance charge has been removed, fixed protection is irrelevant and those taxpayers can contribute more to their pension pots if they wish to.

If you run your own company, you need to consider the tax relief the company receives for the pension contributions it pays to employees. The tax deduction is only given for the accounting period in which the contributions are actually paid, the cost cannot be accrued or pre-paid.

As the corporation tax rate for companies with profits above £250,000 increased on 1 April 2023 to 25%, and a marginal rate of 26.5% now applies to profits between £50,000 and £250,000, pension contributions can be used to bring corporate profits down to the desired level. But the pension payment must be made within the accounting year (it cannot be accrued).

If you are nearing retirement age you may want to start taking your pension by either annuitizing some pension pots or taking a draw-down. Annuity rates are currently high, but you should take independent pensions advice on when to convert pension savings into an annuity.

It is now easier to carry on making pension contributions once you have started to take taxable pension benefits, as the money purchase annual allowance (MPAA) has been increased to £10,000.

Finally, don’t forget to check whether you have maximised your state pension entitlement by having 35 full years of NIC. Where you have a gap in your NIC record since April 2006 you can pay voluntarily class 3 NIC to fill that gap, but you must make the voluntary payment by 31 July 2023.
Two new VAT penalty regimes came into effect for VAT periods beginning on and after 1 January 2023, for late filing of VAT returns and for late payment.

Late filing of a VAT return now attracts a penalty point rather than a warning or formal default surcharge notice. Only when you reach a certain threshold of points do you have to pay a fixed financial penalty of £200.

The points threshold which generates a financial penalty varies according to the frequency of the VAT returns required:

   – Annual returns: £200 penalty at 2 points
   – Quarterly returns: £200 penalty at 4 points
   – Monthly returns: £200 penalty at 5 points

Once the points threshold is reached all further late returns after that attract another £200 penalty until the points slate is wiped clean. You need to achieve full compliance for two years to wipe out points awarded for late quarterly returns.

HMRC has issued the first points for late filed monthly VAT returns. Any late quarterly returns will start to generate penalty points after 7 May 2023.

If you receive a notice about late filing penalties, check the VAT number shown matches your own registration VAT number, as the letter may not include your business name or address.

Next, check if your VAT return was submitted late and if it was, whether you have a reasonable excuse for the late filing. You can appeal against points awarded incorrectly, or where you have a good excuse.

The new late payment penalties give you a grace period of 30 days to pay the VAT due in 2023 but do your best to pay promptly as interest will be charged on late payment at 6.75% from the first day it is late.

Why Do we need to keep receipts?
Our Clients ask why we keep insisting that they should keep receipts.  They complain that it’s a pain to keep claiming for things off your company. Is it worth the effort?  How much cheaper is it to pay (or reclaim) a cost from your company rather than to pay it personally?  

There is a lot to factor in: Corporation Tax, employer NI of 13.8%, employee NI of 12% or 2%, Student loan (for some) of 9%, and PAYE 20%.  Workplace pensions act as a further employment tax. 

The result is surprising.  Let us imagine that you could personally pay either £1,000 second hand computer or £1,200 if the computer is new and includes VAT.  What would it cost for your company to pay you enough to cover this cost?  Alternatively what would it cost the company to pay the cost for you?

After all the deductions the employer will have to incur costs of £1,792 for you to be able to pay the cost of a second hand computer.  If the company pays the cost directly it will end up with a net cost of only £810.  Paying the cost personally wastes 55% in tax.

Now consider a new computer including 20% VAT.  Now the employer will have to pay you the equivalent of £2,150 for you to pay the £1,200 gross cost.  This is much higher than the £810.  Paying the cost personally now creates a total of 62% wasted in tax.

Now this was for a Basic rate taxpayer and ignoring Student loans.  But what if you are paid a salary over £50,000 and are a Higher rate taxpayer?  Now the costs are getting horrendous.  £1,962 for a £1,000 second hand computer or £2,354 if the computer is new and costs £1,200 including VAT.  Dramatically more than £810.  Paying the cost personally creates a total of 59% wasted in tax if the computer is second hand and 66% if it is subject to VAT.

So the message is simple.  If you want to get up to two thirds off….. get your company to pay wherever the cost is related to your business. But please keep the receipt!
May Questions and Answers top
May Key tax dates top
Q1. The payroll for my business has increased during 2022/23, so the employer’s NIC bill topped £100,000 for the first time. Does this mean I can’t claim the Employer’s Allowance for 2023/24? Is there anything I can net off against the NIC liability to bring it down below the £100,000 threshold? Answer

Q2. Can I invest £100,000 on behalf of my company in a new savings account designed for individuals, to take advantage of a higher interest rate? I plan to return the capital plus all interest directly to the company’s account. Answer

Q3. My father died suddenly so his sole-trader business ceased at that point. I am the executor of his Will and I appointed a solicitor to collect the debts due on his outstanding sales invoices after his death. The business was taxed on a cash basis. How should I account for the sales income and expenses received after the business ceased? Answer
1 – Where the taxpayer has not submitted their 2021/22 self-assessment tax return by midnight the following penalties apply:

for online filing – £10 daily penalties

for filing on paper – the greater of £300 or 5% of the tax showing on the return.

3 – Employers must submit the form P46 (Car) to HMRC for employees who have been provided with a company car for the first time during the quarter to 5 April 2023.

31 – Employers must provide a form P60 for 2022/23 to those employees who they employed on 5 April 2023.

Returns under the Crown Dependencies and Overseas Territories reporting rules due for the year to 31 December 2022.

FATCA returns must be submitted to the IRS for the year to 31 December 2022
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, AccountEdge, 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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