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Tax Advice

Should Office Parties Get A Tax Break | Business Tax Advice | Tax Savings for Business
Should office parties get a tax break? 758 513 Stepping Stones Accountancy

Should office parties get a tax break?

As the festive season is fast approaching many companies have finalised their plans for a little fun and laughter choosing to bring back the traditional office party. The key question many are asking is, can they get a tax break?

It appears that the simple reason for asking is that companies want to further encourage staff members to return to the office and funding a Christmas party is seen as a positive step towards that. It will also further boost the hospitality sector, who have been one of the most heavily impacted industries by COVID-19.

Requests are being made of the Government to aid in this by relaxing some of the rules around Christmas parties (or similar events). It is also believed that there is a growing interest for the Government to increase the “tax-free” allowance per employee from £150 per person to £300 per person.

Key reasons for proposing the increase are:

  1. Companies can use this increase to offer thanks to their employees without having to worry about tax implications through the benefit-in-kind restrictions.
  2. Rather than a bonus scheme, a business can thank all its employees as a united team, rewarding everybody in the same way.
  3. As previously mentioned, it boosts the desire to encourage more people to start working back in the office which also results in more activity in town centres and urban areas.
  4. Finally, it gives confidence to people who might previously have been reluctant to get back to working in an office.

As a reminder, and as it currently stands, the tax-free allowance applies to any event in a calendar tax year. It is possible to hold more than 1 event but the total cost cannot be any more than £150 per head (with the hope of this increasing to £300 per head).

If you have any questions around tax and benefit-in-kind, please call us on 01173 700 079 or email hello@steppingstonesaccountancy.co.uk.

5 Tips To A Smooth Tax Return 150 150 Stepping Stones Accountancy

5 Tips To A Smooth Tax Return

If you apply our simple tips you can be assured that your tax return will be a lot easier to complete.

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.

Complete your tax return in June 150 150 Stepping Stones Accountancy

Complete your tax return in June

In our latest animated video we explain why you should completed your tax return in June.

Dividend & Tax Support in Bristol
Dividend Tax 758 513 Stepping Stones Accountancy

Dividend Tax

The largest change to the taxation of small company owners in a generation came into effect on 6 April 2016 but small company owners are yet to see the effect on their tax bill. With the 2015/16 tax returns now all submitted it’s time to look ahead to the impact the dividend tax will have on your 2016/17 tax return.

Under the previous rules dividends were taxed at effectively 0% if they were within the basic rate. They also included a complication in the 10% tax credit where the actual dividend would be increased by 10% with this then refund by way of a tax credit. With the introduction of the dividend tax the tax credit has been removed which should make the numbers on your return a bit easier to understand.

Tax on dividends within the basic rate band will now be at a rate of 7.5% with the higher rate taxed at 32.5%. this will mean the majority of small business owners that operate through a company will now need to pay personal tax as well as corporation tax.

There is some relief as a new dividend allowance, which is essentially a personal allowance that can only be used against dividends, of £5,000 per person has been introduced.

Let’s see an example of a small business owner who takes £8,000 in salary and £32,000 in dividends. Under the old rules no tax would be payable but with the introduction of the new dividend tax their tax position will look like this:

  • Income                           £40,000
  • Less
  • Personal allowance        (£11,000)
  • Dividend allowance        (£5,000)
  • Net income                     £24,000
  • Tax payable (24,000×7.5%) £1,800

That’s an increase of £1,800 in tax but it’s not the worst part. If your personal tax liability exceeds £1,000 you need to make payments on account every January and July. These are payments in advance towards the following tax year. They are calculated as 50% of the last year’s bill and the first payment is due with all of last years tax. In our example above the January 2018 payment will be the £1,800 in tax due for 2016/17 plus a payment on account of £900 towards 2017/18 giving a total amount payable of £2,700. From then on if everything remains equal payments of £900 will be payable every July and January.

So what can be done to help ease this tax bill? Generally, we’ll look to other family members to gift shares to starting with your spouse. A gift of shares to a spouse will attract no capital gains tax and you can then take advantage of the £5,000 dividend allowance that your spouse has available. Gifts of shares to other family members can work but need planning to avoid capital gains tax and you’ll need to be careful not to fall foul of anti-avoidance legislation and make sure the dividend is spent by the family member and doesn’t come back to you. Another option would be to reduce the dividends down and keep investments within the company, this of course assumes you have excess cash.

Whatever measures taken to reduce the tax bill it’s likely a great deal of small company owners will be paying this tax. It’s essential small company owners understand the impact and save for that first January 2018 bill.

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