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September 2021

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To September’s Business Companion News.

VAT Annual Accounting August Returns
We always recommend the VAT Annual Accounting (AA) scheme to clients who have an estimated VAT taxable turnover at the threshold of £1.35 million or less.  It is an excellent scheme that simplifies bookkeeping and reduces the submissions required to HMRC.

For clients with an AA year-end of August we need your up-to-date books or bank statements soon so we can complete your VAT returns.  The deadline is the end of October. If you qualify for Making Tax Digital (MTD) this will be your first MTD return which we will submit for you using MTD-compatible software (Taxcalc).

If you are not already a client but you would like us to simplify your journey to MTD just give us a call on 01422 847500. 
September 2021
· Latest news round up
· Loss relief for companies ceasing a trade
· Inheritance Tax – why giving away money can mean more for the beneficiaries
· Tax-efficient Remuneration
· September Questions and Answers
· September key tax dates
Latest news round up top

September is the final month of the furlough scheme, subject to any last-minute extension. Employers will need to top up the government’s contribution, which is now 60% of wages (up to a maximum cap of £1,875) to ensure the employee receives the requisite 80% (up to £2,500). The deadline for claiming the government contribution for this final month will be 14 October.
Read More
Loss relief for companies ceasing a trade top
Inheritance tax – why giving away money can mean more for the beneficiaries
Companies are able to relieve losses for tax purposes, subject to certain restrictions. These restrictions have been relaxed slightly in recent years, e.g. allowing companies to claim trading losses against other profits for future trading years.
Read More
In most cases, it doesn’t make sense to simply give away money to save tax during a person’s lifetime. For example, a higher rate taxpayer can claim tax relief to offset their income tax bill on qualifying donations made via the gift aid scheme. However, the cost of the donation will always exceed the relief, so it doesn’t make sense to make additional donations purely from a tax perspective, though they can be useful for helping to avoid things like the high-income child benefit charge.
Read More

Tax-efficient Remuneration top
Let us just imagine an employee on £100k pa and minimal pension.  They end up with £67k cash over a year. Tax and NI (incl Empler NI) paid is £46k.

Gross: £k 100
Tax deducted £k 27
Employees NI £k 6
Net Pay £k 67
Employers NI £k 13
Total Employer Cost £k 114
Total Pension Contributions £k 3

let us say they get a £38k pay bonus.

Gross: £k 138
Tax deducted £k 43
Employees NI £k 6
Net Pay £k 89
Employers NI £k 18
Total Employer Cost £k 157
Total Pension Contributions £k 3

So an extra employer cost of £43k (£157k – £114k) has only generated extra Net pay of £22k (£89k – £67k).  Tax and NI (incl Empler NI) paid is now up to £67k.

Finally let us say that the employee and the boss do a deal to save some tax.  Say the pay bonus is now paid in the form of a pension increase and no increase in net pay.

Gross: £k 100
Tax deducted £k 27
Employees NI £k 6
Net Pay £k 67
Employers NI £k 13
Total Employer Cost £k 157
Total Pension Contributions £k 46

The key point is that pension contribution can be greater than the actual £38k pay bonus but the overall cost to the employer is unchanged at £157k.  Therefore if you offer to take a bonus in the form of a pension payment, and include the saving of Employer NI that the employer makes, you can gain a considerable pension contribution which leaves your tax unchanged.  This is because taking the payrise in the form of pension will:
1 save your tax personal allowance which otherwise disappears over £100k of income.
2 save your salary from increased employer NI.

You can take your pension from the age of 55 and 25% of it will be payable as a tax free lump sum.  For a middle aged worker this tax saving offers a far better return than would be available from investing post tax money into an ISA. 
September Questions and Answers top
September key tax dates top
Q1. I am an IT consultant that has just returned from Jersey where I was undertaking some work for the government. I want to raise my invoice now, but don’t know whether to add VAT or not following Brexit? Answer

Q2. I am in the very fortunate position of being promoted this year, despite the effects of COVID19 on our company’s trade. Now that we are starting to recover from the lockdown restrictions, I have been told I can choose a company car, subject to an overall spending threshold (including optional extras). Am I right in thinking that as long as the emissions do not exceed a certain threshold, there is no taxable benefit? Answer

Q3. I own the freehold interest in a building which has recently been leased to a tenant for 23 years. We have received a premium for this and will also receive an annual rent payment. Is the premium a capital sum? Answer
1 – Due date for payment of Corporation Tax for accounting periods ending 30 November 2020

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

14 – Claim deadline for employers for furlough days in August

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/9/2021

30 – Deadline to claim refund of loan charge payments already paid where scheme has been deemed outside the scope of the charge following December 2019 review

30 – last day of temporary hospitality VAT rate at 5%, rising to 12.5% from 1 October

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, Quickbooks, Xero or FreeAgent.

‘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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