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HMRC

What Happens Behind The Closed Doors Of An Accountancy Practice | Why Use An Accountant | Accountant in Bristol
What happens behind the closed doors of an accountancy practice 758 513 Stepping Stones Accountancy

What happens behind the closed doors of an accountancy practice

Most businesses only think about hiring an accountant once a year when it is time to complete their tax return and they’re struggling. But an accountant can add so much more value to your business. Naturally, they can help with your tax return, but their knowledge and skills can be a true asset to your business if you work with them throughout the year.

Here are our 6 jam packed points you may have not known about.

ONE – Accountants have a license to practice and that doesn’t happen over night. Years of studying is behind it. They have to prove they have the correct qualifications, are committed to programme of continual learning and have completed an anti-money laundering course. Vitally important is the professional development, which helps when HMRC/Government makes announcements. Accountants do NOT even get a month notice from the government about changes so they must be prepared for when the change actually happens.

TWO – Accountants have a plethora of tools designed to accurately record and process data along with making it readily available and easy to access for all customers. This makes analysis much more simplified and saves customers a huge amount of time when providing all relevant data.

THREE – Communications are streamlined thanks to the use of systems such as QuickBooks, Receipt Bank, Sage or Xero. Both the client and the accountant can feed data directly into these systems. They can also be automatically updated with all necessary changes implemented by the Government. Of course, these systems are also 100% compliant to all GDPR requirements.

FOUR – Time is being saved by an accountant completing a tax return. By completing your own tax return your focus is taken away from your day job meaning a loss of revenue. It could cost just £300 for an accountant to complete a tax return, in reality it could be double or triple that with the time a solopreneur takes to complete a return and therefore loosing revenue as their focus is away from their day-to-day business.

FIVE – An accountant knows exactly what is required for a tax return, they will look at many areas that individuals just wouldn’t event consider such as allowable expenses & claiming for working from home/mileage/telephone, profit from equipment sales, donations to charity, VAT charges, tax planning and pension contributions…

SIX – Finally an accountant will also ensure you know exactly what is happening. They will keep you up to date with reminders, e-mails and when payments need to be made. Alongside this they are also available to answer any questions or offer guidance as and when you need it.

Remember YOU DON’T KNOW WHAT YOU DON’T KNOW – that is when we come into the picture.

If you have any questions or need help with a tax return, please call us on 01173 700 079 or email hello@steppingstonesaccountancy.co.uk.

Why do we need quarterly updates with Making Tax Digital (MTD) | Tax Advice MTD | Advice on Making Tax Digital
Why do we need quarterly updates with Making Tax Digital (MTD)? 758 513 Stepping Stones Accountancy

Why do we need quarterly updates with Making Tax Digital (MTD)?

As the Making Tax Digital (MTD) scheme continues to gather momentum there are many business owners still unsure of their commitments. However, the requirements can be broken down into 4 key measures which determine why taxpayers (even those who may have a small turnover as little as £10k) are required to provide a breakdown of income and expenses. This needs to be done via an online accounting platform which is approved by MTD and submitted every quarter.

Keeping up to date

By submitting a quarterly return, a business is keeping up to date with their returns and complying with their commitments to MTD. The regulations state that a quarterly filing deadline needs to be submitted online.

More accurate provision for tax payments

Any profit which is reported within the quarterly updates will allow the HMRC to provide an estimate of the tax payments a business might have to make during the tax year. The clear benefit of this is that a business will know how much tax they need to pay and when they will need to pay it, thus allowing for accurate budgeting.

Vital business analysis

Whilst a small business might think their quarterly tax return is only important to them, it is also a very useful tool for the HMRC. Being able to evaluate the data received from tax returns enables them to provide some informed and critical business analysis in relation the state of the economy.

Penalties for late submissions

To ensure businesses recognise the importance of quarterly submissions, HMRC will be implementing penalties to anybody who fails to comply. Penalties will be based around a points system, where any late submission means points added to an account. When a designated number of points are accrued a fine will be issued. Points will stay on record for 24-months after which they will be wiped from the record. To find our more please follow this link – https://www.gov.uk/government/publications/penalties-for-late-submission/penalties-for-late-submission

If you have any questions in relation to Making Tax Digital our team would be happy to help. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

Claiming VAT on Mileage | Advice on Business Mileage VAT | Help with VAT Claims on Business Mileage
Claiming VAT on mileage 758 513 Stepping Stones Accountancy

Claiming VAT on mileage

Those drivers who utilise their own vehicle for work purposes, excluding their normal commute, can claim money back against the approved mileage allowance payment rate (AMAP).

The eligible amount is dependent on several factors which are dictated by HMRC. For example, an employee using a private vehicle such as a van or car for work purposes can claim up to 45p per mile for the first 10,000 miles and 25p per mile after that. The higher 45p rate considers both fuel and wear and tear on your vehicle.

Employers can also claim an additional 5p per mile for each passenger that they take with them on the nominated journey.

In order to make a claim the following information is needed:

  • Date of the trip
  • Full address of tart and end destinations
  • Milage travelled
  • Reason for the journey
  • Any passengers travelling with you (must be employed by the same company)
  • Fuel receipts

As an employer you may only claim the VAT on your employee’s mileage if:

  • The driver is directly employed by you, not contracted or freelance
  • You are paying them milage allowance for utilising their own vehicle for work purposes
  • You can only claim for the fuel part of the allowance
  • The amount you pay is equal to the fuel portion of the claim you make

For the most up to date regulations and advisory fuel rates per mile please refer to the gov.uk website. Or if you need some accountancy help please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

I Thought I was Employed | Am I Employed or Self Employed
I thought I was employed! 758 513 Stepping Stones Accountancy

I thought I was employed!

This article focuses on the importance of having the correct employment documentation in place. All characters are fictional for explanation purposes.

Jamie was working on behalf of XZY Ltd, all work activities were agreed verbally but no written and signed contracts were put in place. Jamie worked at home, in the offices of XYZ Ltd and at customer sites. He was provided with a laptop, business stationery and a company credit card but had no formal induction, no company handbook and did not have a dedicated desk space.

When initial discussions were held it was proposed that Jamie would become an employee and he was sent a payroll form by XYZ Ltd. However, Jamie did not return the completed form or any details regarding his preferred employment status. During the first 4 months various discussions were held about employment for an agreed working relationship but nothing was finalised, although a couple of e-mails were sent.

The last e-mail thread was what both Jamie and XYZ Ltd were adhering to, it stated that the salary would be based on a tiered commission basis but again no written agreement or formal employment agreed because Jamie was too busy to arrange it.

Although he did not have any written agreement Jamie believed he was employed by XYZ Ltd and had an official contract with them. However, when he contacted HMRC to request a copy of his P60 he was advised this was not possible. After several frustrating months Jamie was then advised by the HMRC that under the s8(1) Social Security Contributions (Transfer of Functions) Act 1999 he was classed as being self-employed. This meant he was not entitled to any of the employee benefits such as sickness pay, holiday pay, pension, etc.

There are some discrepancies between employment and tax law when it comes to employment status. However, the lesson is very simple; you are not employed until you have a written and signed contract.

If you need some help, advice or guidance in regard to being a contractor or an employee please feel free to call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

Have Your Claimed Correctly For Your R&D Project | Tax Claim for R&D | R&D Tax Advice
Have you claimed correctly for your R&D project? 758 513 Stepping Stones Accountancy

Have you claimed correctly for your R&D project?

An R&D project basically encompasses the research and development activities that a company will undertake when developing new products and services or when improving products or services which already exist. The R&D phase is the first stage of the project that involves all of the research around market needs and then development of prototypes and products.

Of course, with any R&D project, there is uncertainty. It is not until you complete the process, that you know whether it will be successful or not. This issue is actually something that causes lots of uncertainty when a company is claiming for R&D tax relief. In fact, those companies that only focus on applying with successful R&D projects could be missing out.

If we look at the HMRC guidelines it clearly states that, “not all projects will succeed in their aims. What counts is whether there is an intention to achieve an advance in science or technology”. So, if we translate that it basically means that if the R&D project has met the correct criteria then you can apply for the relevant R&D tax relief.

Often, we are asked about the eligibility of an R&D project and if a claim can be made. In simple terms the following applies:

ELIGIBLE NOT ELIGIBLE
The project did benefit science and technology but was stopped due to commercial reasons The project did not benefit science and technology but was stopped due to commercial reasons
The project did benefit science and technology but was stopped due to commercial reasons The project did not benefit science and technology but was stopped due to technical reasons

Calculating the cost for any R&D tax credit, both successful and unsuccessful is the same. You simply total the time spent on the project, summarise the materials used and then add the 2 costs together. This then forms the eligible expenditure for the claim.

If you are looking for some help with your R&D tax credits claim, please feel free to call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

HMRC Explore Options for Changing Tax Payments | HMRC Tax Advice | Modern Tax Administration | HMRC Tax Help Bristol
HMRC exploring options of changing tax payments 758 513 Stepping Stones Accountancy

HMRC exploring options of changing tax payments

The Government have recently announced a 10-year strategy to build a modern tax administration systems and as part of this they have begun a consultation period which lasts until 13 July 2021. This will involve a “call for evidence” approach which focuses on the benefits and challenges of the current tax payment system with a view to reducing the gap between when income/profits increase and income tax or corporation tax is paid. 

As with any new scheme there will be some issues to overcome. For example, how do you consider payments that are made under the income self-assessment heading or corporation tax for small companies, as these do not fall under the quarterly tax instalments?

How it currently stands

As it currently stands any self-employed taxpayer who has just started trading will have up to 22 months to pay their first tax bill. For an established trader, payment will typically be made twice a year and a balancing payment on any outstanding liability.

If we look at corporation tax there is also a delay between making profit and when a corporation payment is due. Payment is due in 1 instalment no later than 9 months after a company’s accounting period.

The need for change

The current situation brings with it a range of issues, having a large liability to pay at a specific time of the year can cause problems, especially when a tax bill comes out higher than what was expected. Changing this to a more regular payment based on the end of year reports could provide more accurate figures and greater control.

The issue

The HMRC are focussed on trying to improve how they receive funds, especially considering that 34% of their outstanding debts are for income tax and corporation tax.

What are the plans?

Consideration is being given to whether payments should be on either a monthly or a quarterly basis. As it stands HMRC are exploring all options.

Tax payments could be calculated in the year, developed as a result of up-to-date information and with projections on annual liability. Alternatively, tax payments could be based around the previous year’s tax liabilities. Finally, it could be based on estimations of the taxpayer’s liability for the operating year.

Of course, all ideas are on the table at the moment. The focus is to develop ideas that can be given careful consideration before a framework for moving forward can be finalised. HMRC also recognises that plans might need to be different for specific industries or taxpayer types.

If you have any questions or would like to discuss your tax liabilities please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

IR35 Off-Payroll Working | Advice on Off-Payroll Working | Help with IR35 | Accountancy Help IR35
The changes to IR35 and off-payroll working 758 513 Stepping Stones Accountancy

The changes to IR35 and off-payroll working

Historically, when a business engages with a freelancer or contractor to work on a project over a long-term basis they do not appear on any payroll, instead they receive payment once an invoice is submitted. This freelancer or contractor though will often only be working exclusively for the one company.

Due to the recent changes with the off-payroll working rules (also known as the IR35 rules), there is a potential that this will need to change and the contractor will have to become an employee and paid via the company PAYE system.

The following provides a little more information on the IR35 changes and what they mean to self-employed contractors and businesses.

What changes does the IR35 rules bring?

A company (considered to be a medium or large company operating in the private sector) can now determine what a contractors IR35 status is. Obviously the company needs to consider this carefully as it will have a negative impact on a contractor. The contractor will have to become considered an “off-payroll worker”, and added to the payroll system, covering all requirements for tax and national insurance.

If the company is considered to be a small private organisation then no changes are needed and the contractor is in control of their own assessments and employment status.

Contractors need to remember:

  • There is a stronger chance that you will now be considered as employed, impacting tax and national insurance contributions.
  • If you have the choice, you get better tax benefits when being classed as self-employed.

What is a medium/large company?

Within the new IR35 legislation, it will clearly show the criteria that dictates a medium/large company. In essence it has to meet 2 or more of the following conditions:

  • A turnover in excess of £10.2 million
  • Employing more than 50 staff
  • A balance sheet which is larger than £5.1 million

Any contractor working for this size of company will need to be made aware of these changes and the business will need to decide whether they fit in the scope of IR35 and become employed.

How do I deal with “off-payroll working”?

Obviously, with these changes there will be some significant paperwork and key steps a company will need to undertake (to commence at the start of 2021/22 tax year):

  • A company must take the lead in determining IR35 responsibilities (the HMRC CEST tool can assist with this) and they must advise all contractors of the outcome (normally by issuing a status determination statement).
  • As soon as a contractor is identified as being within the IR35 criteria they need to become an employee and be paid under the “off-payroll worker” classification. At this stage the company (or recruitment agency supplying the worker) will become responsible for deducting the income tax and national insurance contributions from the monthly payments.

If you have any questions in relation to IR35 and off-payroll working then the Stepping Stones team would be happy to help. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

An Update on MTD | Making Tax Digital | Advice on Making Tax Digital | Accountancy Support with MTD | What is MTD
An Update on Making Tax Digital (MTD) 758 513 Stepping Stones Accountancy

An Update on Making Tax Digital (MTD)

Making Tax Digital (MTD) was first introduced during the Spring Budget of 2015, its aim was to completely negate the need for an annual tax return. Instead, taxpayers would have all their information loaded directly onto a digital tax account. Alongside this, businesses would only have to worry about paying one simple business tax. The other key benefit announced was the simplification of tax for self-employed people along with the complete removal of the class 2 national insurance contribution.

Despite lots of discussion and various communications from HMRC, including a number of consultation papers that addressed various aspects of the MTD project, none of these objectives have been met. Indeed, back in July 2017 there was an announcement that the scheme would be delayed with MTD for income tax being introduced in 2020 and MTD for VAT being introduced in 2019.

As planned the MTD for VAT did commence in April 2019 but with the exclusion of specific businesses (classed as complex), who were delayed until October 2019. It was also decided that specific public sector bodies would also not be joining the scheme until sometime in 2022. The final implementation of the scheme will see a compulsory digital transfer on all VAT data to happen by April 2021 and the mandating of all VAT registered businesses to comply with MTD by April 2022.

If we look at income tax, this digitalisation involved a far more complex structure. The result is that a taxpayer will have to adopt four quarterly reports and a final report that in most cases will replace the annual self-assessment return. A pilot scheme for this was initiated in April 2018 however, there are currently only a small number of taxpayers and agents participating in this pilot and also only 6 of the major software companies (compliant with MTD) that have provision for recording this.

Although planned for 2017, the MTD for corporation tax and complex businesses (defined as large partnerships with income of over £20m or mixed partnerships that include companies, LLP’s and individuals) has yet been introduced. The HMRC issued a specific consultation documentation in November 2020 (https://www.gov.uk/government/consultations/making-tax-digital-for-corporation-tax), however this consultation will run until 5th March 2021, so in reality it is likely that developments within this field will not be seen until later this year.

The final item to note on MTD is that the reporting of corporation tax will be very similar to that of income tax rather than VAT. There will be a quarterly reporting structure for both income and costs. Companies will still need to assign all their accounting totals for iXBRL when submitting annual accounts to HMRC. Therefore, companies within MTD will have to submit 5 reports to HMRC for their annual accounts, along with the standard 4 quarterly VAT returns and relevant PAYE returns

A Change In VAT Charges As A Result Of Brexit | VAT Help Brexit | VAT Advice
A change in VAT charges as a result of Brexit 758 513 Stepping Stones Accountancy

A change in VAT charges as a result of Brexit

As we prepare for the impact of Brexit, our European Union customers could be entitled to some VAT-free services.

Any business that is expecting their taxable supplies to be less than £83,000 (which is the deregistration threshold) for 2021 can deregister from VAT on 31st December 2020. Alongside this there are other scenarios of non-chargeable VAT.

If you are a business supplying to a consumer (B2C) that is a resident outside of the EU then no VAT needs to be charged. As an example, if you provide accountancy services to an EU country then prices will need to include the 20% VAT but if the customer is outside the EU (for example in Johannesburg) then no VAT is charged. 

As of 1st January 2021, legislation is being changed so that services provided to customers who are not in the UK, but who still remain in the EU, will not be charged VAT. This means that outside of the UK no VAT charges will apply for the direct business sales of items to consumers. Full details can be found via this link – https://www.legislation.gov.uk/ukpga/1994/23/schedule/4A.   

Although companies can deregister for the VAT scheme if they will be solely working with clients outside of the UK, it is their choice, and they can still remain part of the scheme. This then means that any work within the UK which they receive from a supplier, classed as input tax, enables them to claim back as UK expenses.

In summary the new regulations coming in to force on 1st January 2021 will provide some VAT saving opportunities for UK suppliers of business-2-consumer products dealing with any company outside of the UK. The key benefit will be a decrease in tax yield from the HMRC.

If you have any questions or need some help in regard to VAT charges please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

VAT Reverse Charges for Construction Industry | Help with VAT Reverse Charges | Vat Advice for CIS | Construction Industry Scheme Advice Bristol
VAT Reverse Charges for Construction Industry 758 513 Stepping Stones Accountancy

VAT Reverse Charges for Construction Industry

Individuals operating in the Construction Industry need to be aware that from the 1st March 2021 there will be a change in how VAT will be handled. Originally these changes were due to start in October 2019, but they were delayed initially due to Brexit and then subsequently by the Coronavirus pandemic.

The VAT domestic reverse charges for the construction services is, in essence, an extension to the Construction Industry Scheme (CIS). It will apply to any business transactions between VAT registered contractors and sub-contractors that have to be submitted under CIS.

Reverse charges will apply when:

  • VAT is charged in regard to construction services and materials
  • VAT is paid at a standard or reduced rate
  • A UK project is initiated between a VAT registered supplier and a VAT registered customer
  • Both the supplier and customer are registered for CIS
  • Neither the supplier nor the customer is connected in any way

According to the HMRC, they have introduced this initiative to help combat fraud. There have been many cases where construction businesses charge VAT and then decide to stop trading which ultimately means that they take with them between 5% to 20% of additional profit due to the VAT that they have charged.

Ultimately, as with any change of this nature, a business will need to make some significant changes:

  • Staff will need extra training to recognise CIS projects
  • All accountancy and bookkeeping practices will need to be updated to account for the changes in invoicing and reporting obligations
  • The VAT Flat Rate Scheme can no longer be utilised
  • No cash payments can be accepted
  • The cashflow needs of a business will change and consideration might be needed to file monthly returns

In summary, the construction activities that VAT reverse charges apply to are:

  • A building or structure project that has some form of construction work which includes alterations, repairs, extensions or even demolition
  • Any work on a piece of land that includes construction activities for walls, power lines, electrics, water, pipelines and sewers
  • The installation of lighting, heating, air conditioning, power supplies, drainage, water supply and fire protection
  • Painting and decorating of any internal or external surfaces of a building

Should you have any questions or need any further information in regards to the VAT reverse charge scheme please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

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