By Katie Business Advice • Business News 0 Comments

Proposed scheme for self-employed

In times of uncertainty we are seeing the demand for advice increase. We understand the frustrations our clients who are self-employed or freelance.

The Coronavirus Bill includes provisions for a proposed scheme of statutory pay for the self-employed which would if enacted as written, be similar to the Job Retention support scheme already introduced for employees.

The Bill is currently going through the House of Lords with the final stages expected to take place on 25 March 2020. It should be noted that this is a work in progress as amendments to the Bill remain possible during the House of Lords committee stage.

As currently written the Bill includes provision for payments to be made by the government to the self-employed and freelancers so that their net monthly earnings do not fall below the lower of:

• 80% of their monthly net earnings, averaged over the last three years and
• £2,917.

Payments would be capped at £2,917 per month.
The comparable Job Retention scheme for employees will apply to furloughed workers laid off during the crisis and has a cap of £2,500 per month. There are not, as yet, any details available as to exactly how this would work for the self-employed. More details are expected by 25 March.

We are always here to help our existing clients and their family and friends, as well as being available to new customers who find themselves in need of guidance.

We can deal with this safely from your own home, through our video conferencing facility and state of the art technology that keeps you aware of your position at all times.

Stay safe and have a good weekend

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We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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    By Katie Tax News 0 Comments

    Cash Planning and Forecasting

    Cash is King! The lifeblood of any business is its ability to collect cash and pay bills as well as pay its employees, particularly its owners. Far too often small businesses are profitable, but they do not have enough operating capital to meet their current needs. Consequently, they may be forced to sell out to a stronger competitor, sell a portion of the company to investors at an undesirable price or close the doors and put the company out of business. None of these alternatives are typically what the owners intended when starting the business.

    The ability to forecast cash resources and uses is an art and is by no means a well-defined science. None of us have a crystal ball and any cash forecast which is prepared by the management of a company or their accountant can be no more than a guess as to when the customers pay and when your business will pay its obligations. Hopefully, the more effort that is put into cash forecasting the better will be the educated guess and the more accurate the resultant picture of the future operations of your business.

    Starting the Analysis

    One of the most significant factors to be considered in your cash flow forecast is the volume of sales that will be generated in the next several months and for the rest of the period for which you intend to forecast. Your sales forecast must be as fine-tuned as possible. It may be unrealistic to assume that there is a million pound market for your product in your area and you will be able to capture a specified percentage of it. A sales forecast needs to be based on specific facts. These might include your sales history, or the history of similar businesses you have owned or operated, or the competition. In your area, what has been the experience of similar operations?

    Some of the questions that should be addressed would include what other factors could I control such as adding new product lines, deleting unprofitable operations, adding a new salesperson, or terminating one that is not producing to quota? In preparing a forecast, you must also take into consideration items such as the seasonality of your business, the relative state of the economy and the period over which you will forecast.

    Obviously, your ability to forecast sales for the next month is better than it is for three to five years from now. The amount of detail that must be included in the cash forecast is really a matter of preference. It can be based on per unit sales extended out by the sales price of each type of unit or an average sales volume per day, week or month of your type of business in its current environment.

    Cash Collections

    Once you have determined a reasonable level of sales and you are comfortable with the forecast you have made, you must address questions such as: what percentage of my sales are received in cash, and what portion are credit sales for which I will have to carry amounts in debtors? For those that are debtors based, how soon is the cash collected? Do I have to wait for customers to pay me or do third parties such as Visa or MasterCard or a debt factor take the customer’s account and convert it to cash for me with an appropriate discount?

    If you are relying on customer payments for collection of debtor balances you must determine what portion of the debts will be collected in thirty days, sixty days, ninety days and thereafter, and what portion, if any, may never be collected. To assume that 100% of your sales will ultimately be converted to cash is probably unrealistic especially considering the current economic environment and the tight cash situations that may face some of your customers.

    Other sources of cash may be available in addition to sales. Do you expect to bring in a partner or other investors, or can you borrow money from a bank? When will you receive the cash and how much will you get? Part of your cash flow analysis may be to determine how much investment money or borrowings will be required to operate your business.

    Once you are comfortable with the cash receipt side of your business, and the timing of the collections of funds from your sales and other sources, it is necessary to consider the expenses and other cash needs of your business operation.

    By Katie Tax News 0 Comments

    Off-payroll working rules going ahead

    The draft Finance Bill clauses issued for consultation on 11 July include legislation to extend the “off-payroll” working rules to the private sector from 6 April 2020. These changes will have significant implications for workers providing their services through personal service companies and also the end user organisations that engage such workers.

    End users will be required to determine whether the worker would have been an employee if directly engaged and hence the new rules apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. The current CEST (Check Employment Status for Tax) online tool would be improved before the proposed start date.

    By Katie Tax News 0 Comments

    CGT private residence relief changes

    Draft legislation to be included in the next Finance Bill will make important changes to the calculation of CGT private residence relief. As announced in the Autumn 2018 Budget, there will be a reduction in the final period exemption to just 9 months and stricter conditions for letting relief to apply.

    Currently where a property has been the taxpayer’s main residence, the last 18 months of ownership counts as a period of deemed occupation. This will be reduced to just 9 months for disposals on or after 6 April 2020. It is understood that this is being introduced to counteract “second home flipping” allegedly used by MPs when they sell their London residences.

    CGT LETTING RELIEF RESTRICTION

    Currently letting relief provides up to a £40,000 deduction in computing the capital gain on the disposal of a property that was at some time the taxpayer’s main residence. The relief is the lessor of £40,000, the gain attributable to the let period, and the amount of private residence relief. For a couple this could potentially exempt up to £80,000 of the gain from CGT.

    The draft legislation will limit letting relief to those situations where the owner remains in shared occupancy with the tenant, i.e. has lodgers living in the house.

    If you were hoping to take advantage of letting relief on the sale of a property, you might want to consider disposing of the property before 6 April 2020 to take advantage of the current rules. Contact us for advice in this area as we can estimate the additional tax that might be due following the withdrawal of this generous relief.

    By Katie Tax News 0 Comments

    “Small” employers excepted

    “Small” businesses will be outside of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules, with the worker and his or her personal service company effectively self-assessing whether the rules apply to that particular engagement.

    The draft Finance Bill confirms that the definition of “small” is linked to the Companies Act 2006 definition.

    This is where the business satisfies two or more of the following conditions:

    Annual turnover of £10.2 million or less
    Balance Sheet total of £5.1 million or less
    50 employees or less
    There will be an obligation to pass details of the status determination down the labour supply chain. The liability for tax and national insurance will be the responsibility of the entity, paying the personal service company. However, if HMRC are unable to collect the tax from that entity, the liability will pass up the labour supply chain, thus encouraging those entities further up the supply chain to carry out due diligence.

    Please contact us if you would like to discuss how the proposed changes are likely to impact on your business.

    By Katie Tax News 0 Comments

    IHT relief for businesses and farms

    There is currently a very generous 100% relief from inheritance tax for passing on businesses and farm land during lifetime and on death. The rationale for Business Property Relief (BPR) and Agricultural Property Relief (APR) is to enable businesses to be passed on without the need to sell off assets to pay the IHT due on the transfer.

    Currently if a business is wholly or mainly for the purpose of investment, then it will not be eligible for BPR. This is not always straightforward to determine. Many estates include both trading and non-trading business assets, and establishing whether this test is met can be difficult to establish. The ‘wholly or mainly’ test is generally considered to be a greater than 50% test and the OTS are suggesting that the test should be aligned with the much stricter 80:20 test that applies for CGT gift of business asset holdover and entrepreneurs’ relief. If introduced many more business transfers would be liable to IHT.

    On the positive side the OTS have recommended that IHT business property relief should be extended to include Furnished Holiday Lettings aligning the tax treatment with that of Income Tax and CGT where they are treated as “trading” providing that certain conditions are met.

    By Katie Tax News 0 Comments

    Company vat penalty can be a liability of an “officer”

    A recent case before the tax tribunal saw the liability for a late VAT registration penalty being passed on to a manager of the company. HMRC have the power to impose such a penalty on an individual where (1) there is a penalty payable by the company for a deliberate failure (2) the individual on whom HMRC seek to impose liability is an “officer” of the company; and (3) the deliberate failure is attributable to that officer.

    By Katie Tax News 0 Comments

    Diary of main tax events August / September 2019

    Date What’s Due
    01/08 Corporation tax for year to 31/10/18 (unless pay quarterly)
    19/08 PAYE & NIC deductions, and CIS return and tax, for month to 05/08/19 (due 22/08 if you pay electronically)
    01/09 Corporation tax for year to 30/11/18 (unless pay quarterly)
    19/09 PAYE & NIC deductions, and CIS return and tax, for month to 05/09/19 (due 22/09 if you pay electronically)

    By Katie Tax News 0 Comments

    Inheritance tax to be simplified

    The Office of Tax Simplification (OTS) have undertaken a detailed review of Inheritance Tax (IHT), which is perceived by many as a complicated tax. The government normally takes account of OTS recommendations and their report is likely to lead to future changes to the rules. We will keep you posted as the changes may necessitate amending your will or further planning to pass on your wealth.
    There are also numerous misconceptions about how the tax operates, particularly in connection with gifts during someone’s lifetime. One of the proposed changes is to shorten the period for lifetime gifts to be exempt from 7 to 5 years. The OTS also recommended replacing the current £3,000 annual allowance, marriage allowances and the exemption for regular gifts out of income with a £25,000 personal allowance each year.
    NO TAX FREE CGT UPLIFT ON DEATH
    Although the OTS were tasked with simplifying inheritance tax, they also considered the interaction with CGT as many asset transfers potentially have both CGT and IHT implications. Currently there is no CGT on assets transferred on death and the recipient inherits the asset at its market value.
    It has been suggested that the capital gains tax uplift on death distorts decision making relating to assets that benefit from an exemption from Inheritance Tax. Where an individual holds such an asset that has risen in value, and is considering transferring it during their life, they are often advised to retain it until death rather than giving it away during lifetime, because of the tax benefits.
    Where a business is retained until death, any potential capital gains are wiped out and there is no Inheritance Tax to pay. This could lead to an asset being retained rather than being transferred to the next generation at the time that is right for the business.

    We will again monitor the progress of this proposed change as it is likely to have significant implications on family business succession planning.