Katie, Author at A&C Chartered Accountants

October 2, 2024 By Katie Business News • Tax 0 Comments

Should You Bring Forward Asset Disposals Before Budget Day?

With potential changes to Capital Gains Tax (CGT) on the horizon, many taxpayers are considering bringing forward their asset disposals to take advantage of the current rates. Although CGT changes typically take effect from 6 April, there have been instances of mid-year changes in the past, which is causing some concern.

It’s important to note that the disposal date for CGT purposes is the date when contracts are unconditionally exchanged. However, be aware that anti-forestalling legislation may be introduced to prevent artificially bringing forward disposal dates to sidestep any new rules.

There’s still time to sell listed investments before the budget announcement, but for assets such as businesses or property, the process generally takes longer unless a buyer is already lined up. If you’re considering selling assets ahead of any potential changes, we recommend acting sooner rather than later.

We can guide you through the implications of any upcoming CGT changes and help you make informed decisions regarding asset disposals. If you’d like to discuss your options, get in touch with us today.

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At A&C Chartered Accountants, we’re not just accountants; we’re your partners in success. Based in Manchester, our experienced team handles everything from managing limited company and sole trader accounts to expertly navigating tax returns. Beyond financials, we play a crucial role in driving your business’s growth, strategically steering it towards success with confidence and clarity.

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October 1, 2024 By Katie Sustainability 0 Comments

How SMEs Can Create a Decarbonisation Plan to Drive Success and Sustainability

As the world shifts towards a low-carbon economy, businesses of all sizes are under increasing pressure to reduce their carbon footprints. For small and medium-sized enterprises (SMEs), decarbonisation might seem like a daunting task, but it’s an essential step toward future-proofing your business, improving efficiency, and contributing to a healthier planet.

At A&C Chartered Accountants, we believe that decarbonisation isn’t just for big corporations. SMEs play a critical role in the global economy, and with the right plan, they can lead the charge toward a more sustainable future. So, how can your SME develop an effective decarbonisation plan?

1. Understand Your Carbon Footprint

The first step in decarbonising your business is understanding where your carbon emissions come from. This is known as your carbon footprint and typically falls into three categories:

Scope 1: Direct emissions from sources owned or controlled by your business (e.g., company vehicles, on-site fuel combustion).
Scope 2: Indirect emissions from the generation of purchased energy (e.g., electricity).
Scope 3: Other indirect emissions from your value chain (e.g., suppliers, product use, waste).

To create a decarbonisation plan, you’ll need to assess all three scopes and pinpoint where the bulk of your emissions come from. While some SMEs may find it challenging to measure Scope 3 emissions, focusing on Scope 1 and 2 is a great start.

2. Set Clear, Measurable Goals

Once you have a clear picture of your carbon footprint, the next step is to set decarbonisation goals. These should be specific, measurable, and aligned with national and international targets, such as the UK’s goal to achieve net zero emissions by 2050.

Some examples of decarbonisation goals include:

Reducing energy consumption by a certain percentage over a set period.
Transitioning to 100% renewable energy within the next five years.
Reducing company vehicle emissions by introducing electric vehicles (EVs).

Setting realistic and time-bound goals will help you stay on track and make your decarbonisation journey more manageable.

3. Implement Energy-Efficient Practices

One of the most effective ways SMEs can decarbonise is by improving energy efficiency. There are several simple yet impactful measures your business can take, such as:

Upgrading lighting to energy-efficient LED bulbs.
Insulating your premises to reduce heat loss.
Installing smart meters to monitor and reduce energy consumption.
Switching to energy-efficient equipment (e.g., office appliances, heating systems).

Even small changes can lead to significant reductions in your carbon emissions—and your energy bills.

4. Embrace Renewable Energy

Transitioning to renewable energy is a key part of any decarbonisation plan. SMEs can switch to a renewable energy supplier or consider installing on-site renewable energy sources, such as solar panels, wind turbines, or heat pumps.

If installation is not feasible, choosing a green energy tariff ensures that the energy you purchase comes from renewable sources, which can dramatically reduce your Scope 2 emissions.

5. Engage Your Supply Chain

Decarbonisation doesn’t stop with your own business—it extends to your supply chain. Collaborating with suppliers to ensure they are adopting sustainable practices is crucial, particularly when it comes to reducing Scope 3 emissions.

Ask suppliers about their own decarbonisation efforts, consider working with low-carbon suppliers, and promote transparency throughout your supply chain to help reduce the carbon impact of the products and services you use.

6. Monitor and Report Progress

Decarbonisation is an ongoing process. Regularly monitoring and reporting on your progress helps you stay accountable and adapt your strategy as needed. Many businesses use key performance indicators (KPIs) to track their emissions reductions, and you can include this in your annual reports to show clients and stakeholders your commitment to sustainability.

Additionally, reporting on your progress is a great way to engage your team, customers, and suppliers in your decarbonisation efforts, ensuring that sustainability becomes part of your company culture.

7. Offset Where Necessary

While the goal is to reduce emissions as much as possible, there may be some unavoidable carbon emissions that can’t be eliminated immediately. In these cases, SMEs can consider carbon offsetting, which involves investing in projects that remove or reduce emissions elsewhere, such as tree planting or renewable energy initiatives.

However, it’s important to note that offsetting should complement, not replace, your direct emissions reduction efforts.

The Benefits of Decarbonising Your SME

Reducing your carbon footprint isn’t just about meeting regulatory requirements—it can have significant business benefits:

Cost Savings: Energy-efficient practices and renewable energy can reduce your utility bills, while improving resource efficiency can cut operational costs.
Enhanced Brand Image: Consumers are increasingly choosing businesses that prioritise sustainability, helping you build a stronger, more loyal customer base.
Access to Green Funding: Many investors are now focusing on green businesses. Decarbonising your SME could make you eligible for grants, loans, or other sustainable financing options.
Future-Proofing: As more regulations emerge around carbon emissions, being ahead of the curve will ensure your business remains compliant and competitive.

At A&C Chartered Accountants, we understand the challenges SMEs face when developing a decarbonisation plan, but we also know the incredible opportunities it presents. Our team is here to guide you through each step of the process—from assessing your carbon footprint to creating a sustainable, cost-effective plan that benefits both your business and the planet.

Contact us today to learn more about how we can help your SME decarbonise and thrive in a low-carbon economy.

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October 1, 2024 By Katie Business News • Tax 0 Comments

Possible Changes to Capital Gains Tax in the October Budget: What to Expect

With the October budget approaching, many are speculating about potential changes to Capital Gains Tax (CGT), which could have a significant impact on business owners, entrepreneurs, and investors alike. One of the most talked-about possibilities is the alignment of CGT rates with income tax rates – a move reminiscent of the regime under Gordon Brown when he served as chancellor. Given Rachel Reeves’ admiration for Gordon Brown’s approach, we might also see a return to taper relief, which could benefit long-term investments.

At A&C Chartered Accountants, we’re keeping a close eye on the possibility of the reintroduction of Business Asset Taper Relief. This could reduce the effective CGT rate to as low as 10% after 10 years of ownership, encouraging long-term investment and entrepreneurship. However, it’s crucial to remember that any relief could come with stricter conditions, especially if the government tightens eligibility criteria further. Many business owners are hoping that Business Asset Disposal Relief (BADR) – or something similar – is retained, to continue incentivising entrepreneurship and growth.

In addition to these potential changes, there may be further restrictions on Private Residence Relief or adjustments to Hold Over Relief for transfers into and out of trusts. Another controversial change to watch out for is the possible removal of the CGT-free uplift to probate value on death, as previously suggested by the now-defunct Office of Tax Simplification (OTS). This change could mean beneficiaries inherit the deceased’s original CGT base cost, rather than the current probate value – potentially leading to larger tax liabilities upon the sale of inherited assets.

As we await the budget announcement, our team at A&C Chartered Accountants will continue to monitor the situation closely, ensuring we provide up-to-date advice to help you navigate any changes. If you’re concerned about how these potential CGT reforms could affect you or your business, get in touch with us to discuss tailored strategies to mitigate your capital gains tax liabilities.

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September 25, 2024 By Katie Business News • Sustainability 0 Comments

A&C Chartered Accountants earns ‘Good Business Charter’ accreditation showcasing commitment to sustainability

A&C Chartered Accountants, an independent accounting and business advisory firm with offices in Manchester, is proud to announce its accreditation by the Good Business Charter (GBC), further reinforcing our commitment to responsible business practices and sustainable growth.

This notable recognition reflects our dedication to ethical business conduct across all aspects of our work. The GBC accreditation is awarded to businesses that meet ten key components, which focus on critical areas such as employee welfare, environmental impact, and fair treatment of clients and suppliers. By embracing all ten principles, A&C Chartered Accountants ensures that we not only grow our business but do so responsibly, staying true to our values and long-term goals.

Katie Hoszowskyj, Sustainability Lead at A&C Chartered Accountants, expressed her thoughts on this achievement: “Securing the Good Business Charter accreditation is a proud moment for us. It underscores our commitment to putting people, clients, and our community at the heart of what we do. This accreditation reflects our efforts to create a diverse, inclusive, and safe work environment that fosters personal growth and development for everyone at A&C Chartered Accountants.”

For over a decade, A&C Chartered Accountants has been dedicated to operating as a responsible business. We have a dedicated internal team that assesses our environmental footprint and continually implements measures that help us become more sustainable. Our responsible business journey involves encouraging sustainable practices, being accountable for our environmental and social impact, and promoting these principles to our team, clients, and community.

Our sustainability framework is centred around three pillars: reducing environmental impact, enhancing social responsibility, and upholding ethical governance. As we grow, we recognise the need for sustainable expansion, making strategic decisions that benefit not only our business but also the environment and the people we serve.

The ten components of the Good Business Charter that we are committed to are:

Real Living Wage – We pay all our employees a wage that reflects the cost of living, not just the government minimum.
Fairer Hours and Contracts – We ensure secure, stable employment by providing guaranteed hours and avoiding exploitative contracts.
Employee Well-being – We prioritise the mental and physical health of our employees, ensuring they feel supported and valued.
Employee Representation – We give our employees a voice, encouraging open communication and feedback within the business.
Diversity and Inclusion – We promote an inclusive workplace where diversity is celebrated, and everyone is treated with respect and fairness.
Environmental Responsibility – We are committed to reducing our environmental impact, actively working towards more sustainable practices.
Paying Fair Tax – We pay the taxes we owe and commit to full transparency in our tax affairs.
Commitment to Customers – We always act in the best interest of our clients, delivering high-quality services with integrity.
Ethical Sourcing – We ensure our suppliers uphold high ethical standards and that our supply chain reflects our values.
Prompt Payment – We adhere to the Prompt Payment Code, ensuring we pay our suppliers on time and maintain strong relationships.

Achieving GBC status aligns with our wider responsible business goals, having also signed up to the Prompt Payment Code earlier this year. Additionally, A&C Chartered Accountants is proud to be part of a growing group of UK businesses that voluntarily pay the real Living Wage, ensuring that all our staff are paid fairly for their contributions.

Katie Hoszowskyj added, “We believe in working together towards a sustainable future. Whether it’s reducing our plastic usage or aligning our efforts with the UN Sustainable Development Goals, we are committed to transparency and consistency across all our operations. Our partnerships with charities further cement our dedication to social responsibility and giving back to the communities we serve.”

This accreditation by the Good Business Charter marks a pivotal moment in A&C Chartered Accountants’ sustainability journey. As we continue to grow, we remain focused on making responsible decisions, driving profit with purpose, and holding ourselves accountable to our sustainability objectives. Our strategic framework will guide us in fostering a fair, ethical, and inclusive culture, while making sustainable choices at every step.

September 10, 2024 By Katie Business Advice • Business News • Sustainability 0 Comments

Reducing Your SME’s Carbon Footprint in Manchester: A Guide to Bee Net Zero

Manchester is a city known for its innovation, community spirit, and commitment to sustainability. In recent years, Manchester has set ambitious goals to reduce its carbon emissions, and SMEs are a vital part of that journey. Whether you’re a small business owner in retail, manufacturing, or services, reducing your carbon footprint isn’t just about playing your part in tackling climate change—it’s about future-proofing your business, saving costs, and joining a growing movement of environmentally conscious enterprises.

A&C Chartered Accountants is proud to support Manchester SMEs on their sustainability journey, and one of the key initiatives driving change in the region is Bee Net Zero.

What Is Bee Net Zero?

Bee Net Zero is a collaborative initiative designed to help businesses across Greater Manchester reach net zero carbon emissions by 2038—12 years ahead of the UK’s national target. Spearheaded by the Greater Manchester Combined Authority, in partnership with leading organisations like The Growth Company and Manchester’s business community, the Bee Net Zero initiative provides practical resources and guidance to help local businesses, including SMEs, reduce their carbon footprints.

For SMEs in Manchester, this initiative represents an incredible opportunity to lead the charge in decarbonisation while benefiting from the resources and support that Bee Net Zero provides.

Why Should Manchester SMEs Care About Their Carbon Footprint?

For many small businesses, reducing carbon emissions might feel like a challenge, but it brings significant rewards. Here’s why tackling your carbon footprint matters:

Meet Customer Expectations: Consumers and clients are increasingly seeking out businesses that prioritise sustainability. By actively reducing your carbon footprint, your SME can attract a new wave of eco-conscious customers.
Stay Ahead of Regulation: With more stringent climate legislation on the horizon, reducing your carbon emissions now means your business will be ahead of the curve when it comes to future compliance requirements.
Improve Efficiency & Cut Costs: Lowering your carbon emissions often goes hand-in-hand with improving efficiency. From cutting down on energy use to reducing waste, these changes can have a direct impact on your bottom line.
Join the Manchester Movement: By getting involved in initiatives like Bee Net Zero, you’ll be part of a wider community of businesses all working towards a common goal—making Manchester one of the greenest cities in the UK.

How to Start Measuring Your SME’s Carbon Footprint

Before you can reduce your carbon footprint, you need to know where you stand. This begins with calculating the carbon emissions your business generates. The main sources of emissions for most SMEs come from:

Energy consumption (electricity, heating, and cooling)
Business travel (vehicle emissions, flights, public transport)
Supply chain emissions (goods and services purchased)
Waste production (waste sent to landfill, recycling)

By gathering data on your energy usage, travel habits, and waste, you can begin to understand your current impact and set measurable goals to reduce emissions. Many Manchester-based businesses are already taking these steps as part of the Bee Net Zero initiative, using free tools and resources provided to track their emissions.

Bee Net Zero: Helping Manchester’s SMEs Lead the Way

The Bee Net Zero initiative offers a range of support services tailored to SMEs, including:

Carbon Footprint Calculators: Bee Net Zero provides businesses with access to tools that help calculate their current carbon footprint, giving you a clear starting point for improvement.
Energy Efficiency Guidance: Through the initiative, SMEs can access energy audits to identify opportunities to improve energy efficiency, reduce waste, and cut down on costs.
Support for Renewable Energy Adoption: Transitioning to renewable energy is one of the most effective ways to decarbonise. Bee Net Zero connects businesses with suppliers and advisors to help switch to renewable energy sources, like solar power, at a manageable cost.
Sustainability Grants & Funding: There are grants and financial incentives available to SMEs that are serious about reducing their carbon footprints. Bee Net Zero partners with organisations that provide financial support to help cover the costs of energy-efficient upgrades and renewable energy installations.
Collaboration Opportunities: Bee Net Zero encourages collaboration across sectors, enabling businesses to share best practices, network, and create partnerships with like-minded organisations.

The Road to Net Zero: Practical Steps for Your SME

If you’re an SME in Manchester, there’s never been a better time to commit to reducing your carbon footprint. Here are some practical steps to get started:

1. Perform an Energy Audit

Identify where your business is using the most energy. This could be lighting, heating, or specific equipment. Once you’ve pinpointed the biggest energy drains, you can take steps to reduce consumption by upgrading to more energy-efficient systems or changing your habits.

2. Transition to Green Energy

Switching to a renewable energy provider is one of the simplest and most impactful ways to reduce your carbon emissions. Many suppliers now offer affordable green energy tariffs that are accessible to SMEs.

3. Encourage Sustainable Transport

Reduce business travel emissions by encouraging the use of public transport, carpooling, or even investing in electric vehicles for your company fleet.

4. Minimise Waste

Implement recycling schemes, reduce packaging, and find ways to repurpose materials within your supply chain. Waste management is a significant part of reducing your overall carbon footprint.

5. Engage Your Team

Sustainability works best when it’s embedded in your company culture. Educate your employees about the importance of reducing emissions and create a workplace that supports sustainable practices—whether that’s through reducing office waste or promoting energy-efficient behaviour.

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September 8, 2024 By Katie Business Advice 0 Comments

Tax-Free Childcare: How Employers Can Offer Nursery Benefits

ax-Free Childcare: How Employers Can Offer Nursery Benefits and Save

With childcare costs continually rising, many UK employers are now providing workplace nurseries or crèche facilities as a tax-free benefit. This can be a highly attractive perk, helping businesses attract and retain valuable staff. Larger employers may set up an on-site nursery, but for smaller companies, partnering with local childcare providers is often more practical and cost-effective.

Tax-Free Childcare Benefits for Employers

Offering tax-free childcare benefits can significantly reduce costs for employees while giving employers a competitive edge in attracting talent. When structured correctly, these childcare schemes can be completely tax-free, but to qualify, businesses must meet HMRC’s key conditions.

1. Financial Responsibility for Tax-Free Childcare

For your nursery provision to be tax-exempt, HMRC requires that employers take an active role in the financing of childcare. This includes covering a proportion of the costs and sharing the responsibility for any financial losses. Simply paying a set fee per child is unlikely to meet the strict requirements for tax-free childcare benefits.

2. Employer Involvement in Nursery Management

To maintain tax-free status, employers must also play a direct role in managing the nursery. This could involve appointing nursery staff or being actively involved in day-to-day decision-making, such as allocating childcare places. Minimal involvement or rubber-stamping decisions won’t meet HMRC’s guidelines for tax exemption.

HMRC Checks on Childcare Schemes

Recently, HMRC has started closely monitoring employer-provided childcare schemes to ensure they meet tax exemption rules. Some third-party intermediaries offer childcare services under salary-sacrifice arrangements but fail to involve employers sufficiently. Without active financial and managerial involvement, employers risk losing the tax-free status of these benefits.

If you are unsure whether your current childcare scheme qualifies for tax exemption, A&C Chartered Accountants can provide expert guidance to help you navigate HMRC’s regulations.

Alternatives for the Self-Employed

For the self-employed or employees whose companies don’t provide nursery facilities, a government tax-free childcare account is a great alternative. This scheme allows eligible parents to save 20% on their childcare costs, making it an appealing option for those not covered by employer-provided childcare benefits.

Contact A&C Chartered Accountants today for more information on tax-free childcare schemes and to ensure your arrangements are fully compliant with HMRC’s regulations

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September 7, 2024 By Katie Tax 0 Comments

Should You Consider Passing on Wealth Now to Manage Inheritance Tax?

Many individuals, including high-profile figures like TV presenter Anne Robinson, are considering passing on substantial amounts of their wealth ahead of anticipated changes to inheritance tax (IHT) in Labour’s upcoming Budget on 30 October. Robinson, for example, has reportedly transferred £50 million to her children and grandchildren. So, should you be thinking about doing the same?

Review Your Estate’s Value and Inheritance Tax Exposure

Before making any decisions, it’s essential to assess your estate’s value and potential IHT liability under the current rules. Each individual is entitled to a nil rate band of £325,000, and there’s an additional residence nil rate band (RNRB) of up to £175,000. This applies if the family home, or assets of equivalent value, are left to direct descendants upon death.

For married couples or civil partners, there’s an unlimited exemption for transfers made during a lifetime or upon death to a surviving spouse. If any part of the deceased spouse’s nil rate bands remains unused, they can be transferred to the surviving partner, potentially increasing the tax-free allowance to £1 million.

However, this isn’t as straightforward as it sounds. If your estate exceeds £2 million, the RNRB reduces by £1 for every £2 that the estate exceeds £2 million, disappearing entirely at £2.7 million. For estates exceeding this threshold, only the combined nil rate band of £650,000 would apply. The current IHT rate on estates above the nil rate band is 40%.

Business and Farming Assets: What’s the Current IHT Relief?

Currently, 100% IHT relief is available for business and farming assets transferred during a lifetime or on death. This relief helps prevent survivors from being forced to sell assets to cover IHT liabilities. However, there’s concern that these generous reliefs could be revised or even removed under the new government.

What About Lifetime Transfers?

Under existing rules, if you transfer assets during your lifetime and survive for at least 7 years, no IHT is payable. These are known as potentially exempt transfers (PETs). However, if you pass away within 7 years of making the gift, IHT would be due.

It’s important to note that these gifts must be outright, with no continued use of the asset by the donor. For instance, gifting your family home but continuing to live there would typically be ineffective unless you meet specific conditions, such as paying market rent.

There could also be capital gains tax (CGT) consequences to consider when gifting during your lifetime, though you may be able to use holdover relief to defer the gain. This relief is currently available for business assets and transfers of assets into trust.

Act Now: Consider Your Options Before Budget Day

With potential changes to the tax system on the horizon, now may be the right time to consider your options. At A&C, our inheritance tax advisors can help you navigate the complex IHT landscape and assess whether transferring wealth now could be beneficial for you and your family. Contact us today to discuss your situation and ensure you’re prepared before Budget Day.

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August 28, 2024 By Katie Business Advice • Startups • Tax 0 Comments

Accountant vs Financial Advisor: Which One Does Your Start-up Need?

As an entrepreneur, you’re juggling countless tasks, from developing your product to securing your first customers. Amidst all the hustle, managing your finances effectively is crucial. But when it comes to financial management, should your start-up hire an accountant, a financial advisor, or both? Understanding the differences between these roles and how they can benefit your business is key to making the right decision.

The Role of an Accountant in Your Start-up

An accountant is essential for keeping your financial records in order. Their expertise lies in managing day-to-day transactions and ensuring your business stays compliant with tax laws. Here’s how an accountant can support your venture:

Bookkeeping and Record-Keeping: Accountants handle the detailed tracking of income, expenses, and other financial transactions that are crucial to your business. This accurate financial record-keeping is vital for understanding your financial position and planning for the future.
Tax Preparation and Compliance: Navigating the complexities of taxes can be daunting, especially for new businesses. An accountant ensures that your enterprise complies with all tax obligations, prepares and files returns, and advises on strategies to minimize tax liabilities.
Financial Reporting: Accountants prepare essential financial statements like balance sheets and income statements. These reports are invaluable for monitoring your financial health and can be crucial when seeking investment.
Payroll Management: As your business grows, managing payroll becomes more complex. An accountant ensures your employees are paid accurately and on time, and that all related tax filings are handled correctly.
Basic Financial Advice: Accountants can also provide essential advice on budgeting, cash flow management, and financial planning – key areas for businesses looking to scale.

When Should Your Start-up Hire an Accountant?

A specialist startup accountant can be beneficial at various stages of your business journey:

Early Stages: An accountant can help set up your financial systems and ensure that your start-up is compliant with all regulatory requirements. This strong foundation is critical for avoiding financial pitfalls.
Tax Time: Preparing taxes can be complex, especially with multiple revenue streams or international transactions. An accountant takes this burden off your shoulders, ensuring that everything is filed accurately and on time.
Scaling Up: As your business grows, so do your financial obligations. An accountant helps manage this growth, providing the insights needed to make informed decisions.

The Role of a Financial Advisor

While accountants handle the day-to-day financial operations, financial advisors focus on long-term strategy. They help you manage financial resources and make informed decisions about growth. Here’s what a financial advisor can do for your business:

Investment Strategy: A financial advisor assists in making smart decisions about investing profits. Whether you’re looking to invest in stocks, bonds, or other assets, they develop a strategy tailored to your goals and risk tolerance.
Growth and Expansion Planning: As you begin to grow, a financial advisor can guide you through the process of scaling up – whether that means securing funding, expanding into new markets, or acquiring another company.
Risk Management: Businesses face various risks, from market fluctuations to operational challenges. A financial advisor helps you assess these risks and develop strategies to mitigate them, ensuring long-term viability.
Retirement Planning: Although it might seem far off, planning for retirement is crucial even in the early stages. A financial advisor can help set up retirement plans that benefit both you and your employees.
Exit Strategy: Every business should have an exit strategy, whether it’s selling the company, going public, or another option. A financial advisor helps you plan for this, ensuring you get the best possible outcome when the time comes.

When Should You Hire a Financial Advisor?

Hiring a financial advisor can be particularly beneficial at key points in your business lifecycle:

Post-Launch: Once your business is generating revenue, a financial advisor can help you make the most of your profits by advising on investments and growth strategies.
Pre-Expansion: As you prepare to scale, a financial advisor provides the strategic guidance needed to manage growth effectively, ensuring your long-term success.
Wealth Management: If your business is highly profitable, a financial advisor helps manage and grow that wealth, securing the financial future of your business and personal assets.

Accountant vs Financial Advisor: Do You Need Both?

The decision to hire an accountant, a financial advisor, or both depends on your specific needs:

For Day-to-Day Financial Management: If your primary focus is on managing daily finances, tax compliance, and year-end reporting, an accountant is essential. They ensure your financial records are accurate and that you meet all regulatory requirements.
For Long-Term Strategic Planning: If you’re looking at the bigger picture – planning for growth, managing investments, or preparing for an exit – a financial advisor is invaluable. They provide the strategic advice needed to achieve your long-term goals.
For Comprehensive Financial Management: Many businesses benefit from having both an accountant and a financial advisor. The accountant handles the day-to-day operations, while the financial advisor focuses on strategy and growth, providing a balanced approach to managing your finances.

How A&C Chartered Accountants Can Help

At A&C Chartered Accountants, we understand the unique challenges that businesses face. Our team of experienced accountants and financial advisors work together to provide comprehensive financial management tailored to your needs.

Whether you need help with bookkeeping, tax compliance, or long-term financial planning, we’re here to support you every step of the way. Let us help you navigate the complexities of finance so you can focus on what you do best – growing your business.

Conclusion

Deciding whether your business needs an accountant, a financial advisor, or both depends on your current financial situation and future goals. Accountants are essential for maintaining financial health and ensuring compliance, while financial advisors help you plan for the future and manage growth. For many businesses, having both professionals in your corner provides the best of both worlds, ensuring your finances are managed effectively now and in the future.

If you’re unsure which services are right for your business, why not get in touch today? We offer a free consultation to help you determine the best financial strategy for your unique needs.

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August 22, 2024 By Katie Business Advice 0 Comments

Why Every Start-Up Needs Accurate Financial Forecasting

As a start-up or small business, you’re likely juggling numerous tasks – finding customers, refining your product or service, and managing day-to-day operations. However, one area that often gets overlooked but is crucial for your success is financial forecasting. At A&C Chartered Accountants, we understand how vital it is for businesses to have a clear view of their financial future. That’s why we’ve partnered with tools like Futrli and Sage to ensure our clients have the best possible insights to fuel their growth.

The Importance of Financial Forecasting for Start-Ups and SMEs

Financial forecasting isn’t just for large corporations with dedicated finance teams. For start-ups and SMEs, it’s a game-changer. Accurate forecasting allows you to:

Plan for the Future: By predicting cash flow, expenses, and revenue, you can make informed decisions about your business’s growth. Whether it’s deciding when to hire new staff, invest in new technology, or expand into new markets, a solid forecast is your roadmap.
Manage Cash Flow: Cash flow is the lifeblood of any business, especially in the early stages. Forecasting helps you anticipate any shortfalls and plan how to bridge them, whether that’s through a business loan, investment, or adjusting your payment terms.
Secure Funding: Investors and lenders want to see that you have a clear understanding of your financial position and future prospects. A well-prepared financial forecast can be the key to securing the funds you need to grow.
Mitigate Risks: Running a business always involves risks, but forecasting allows you to identify potential pitfalls early and take proactive steps to mitigate them.

How Futrli Enhances Financial Forecasting

Futrli is a powerful tool that we use at A&C Chartered Accountants to provide our clients with dynamic, real-time financial insights. Here’s how it helps:

Real-Time Data: Futrli integrates seamlessly with your existing accounting software, like Sage, to pull in real-time financial data. This means your forecasts are always up-to-date, reflecting the latest figures from your business.
Scenario Planning: With Futrli, you can run multiple ‘what-if’ scenarios to see how different decisions might impact your business. This feature is particularly valuable for start-ups, where the business environment can be unpredictable.
Visual Insights: Not everyone is a financial expert, and that’s okay. Futrli turns complex financial data into easy-to-understand visuals, making it easier for you to grasp your business’s financial health at a glance.
Collaboration: Futrli makes it easy to share forecasts and insights with your team, investors, or advisors, ensuring everyone is on the same page.

Why We Use Sage

Sage is another integral tool in our financial management toolkit. It’s a tried-and-tested accounting solution that offers robust features for managing everything from payroll to tax compliance. Here’s why we recommend Sage to our clients:

User-Friendly: Sage is designed with small businesses in mind. It’s easy to set up and use, even if you don’t have a background in accounting.
Scalable: As your business grows, Sage grows with you. It’s scalable, so you won’t need to switch systems as your needs evolve.
Compliance: Sage stays up-to-date with the latest tax regulations, helping you stay compliant and avoid any nasty surprises.
Integration: Sage integrates seamlessly with Futrli, providing a comprehensive financial management solution that covers both accounting and forecasting.

Partnering with A&C Chartered Accountants

At A&C Chartered Accountants, we specialise in helping start-ups and SMEs navigate the complexities of financial management. By leveraging the power of Futrli and Sage, we ensure our clients have the tools and insights they need to make informed decisions and drive their businesses forward.

Whether you’re just getting started or looking to scale, accurate financial forecasting is essential. Get in touch with us today to find out how we can help you harness the power of Futrli and Sage to fuel your growth.

August 6, 2024 By Katie Tax 0 Comments

How to Navigate the 60% Tax Trap

For those earning between £100,000 and £125,140, the 60% tax trap can significantly impact disposable income and financial planning. This phenomenon occurs due to the gradual tapering of the personal allowance, resulting in an effective marginal tax rate of around 60%. Here’s how it works and how to mitigate its impact.

Understanding the 60% Tax Trap

When your income surpasses £100,000, your personal allowance is reduced by £1 for every £2 earned over this limit. Consequently, the interaction of the higher income tax rate (40%) and the diminishing personal allowance (equivalent to an additional 20% tax) results in an effective marginal tax rate of 60% on earnings between £100,000 and £125,140. This means that for every extra pound earned in this range, you only take home 40 pence due to the combined effects of higher tax and reduced allowances.

Strategies to Avoid the 60% Tax Trap

Increase Pension Contributions

Tax-Efficient Savings: By boosting your pension contributions, you can effectively lower your taxable income, offering immediate tax relief and potentially restoring your personal allowance. For instance, if you earn £125,140, contributing £20,112 to your pension can reduce your taxable income to £100,000, helping you regain your personal allowance and avoid the 60% tax trap.

2. Make Charitable Donations

Gift Aid: Donations to registered charities can reduce your taxable income. Under the Gift Aid scheme, your charitable contributions are increased by 25%, and higher-rate taxpayers can claim additional tax relief on their donations, making this a dual-benefit strategy.

3. Utilise Salary Sacrifice

Non-Cash Benefits: Opting for salary sacrifice schemes where part of your salary is exchanged for non-cash benefits, such as childcare vouchers or additional pension contributions, can effectively reduce your taxable income. This not only helps in avoiding the higher marginal tax rate but also provides valuable benefits.

Additional Tips for Optimising Tax Efficiency

Tax-Efficient Investments: Consider investing in ISAs (Individual Savings Accounts), which allow you to earn interest or investment gains tax-free. This doesn’t reduce your taxable income but can be a wise way to manage your savings and investments more tax-efficiently.

Professional Advice: Navigating the complexities of the UK tax system to avoid the 60% tax trap requires a nuanced understanding of tax legislation. Consulting with a financial advisor can provide personalised strategies tailored to your specific financial situation, ensuring you maximise your savings and remain compliant with tax laws.

Conclusion

Avoiding the 60% tax trap requires careful planning and making use of available tax reliefs and allowances. By increasing pension contributions, making charitable donations, and utilising salary sacrifice schemes, you can significantly lower your taxable income and reclaim your personal allowance. For optimal results, it’s advisable to seek professional financial guidance to navigate these strategies effectively and enhance your tax efficiency.

August 4, 2024 By Katie Tax 0 Comments

Changes to VAT on Private School Fees for 2025: What You Need to Know

On 29 July 2024, the Chancellor announced important changes to VAT on private school fees. Starting from 1 January 2025, all education services and vocational training provided by private schools, or connected persons, will be subject to VAT at the standard rate of 20%. This update signifies a major shift in VAT on private school fees.

Key Points of the New VAT Rules for Private Schools

Effective Date and Applicability:
- From 1 January 2025, VAT at 20% will apply to all education and vocational training services provided by private schools. This marks a significant change in VAT private education UK, impacting the cost structure of private schooling.
- Boarding services provided by private schools will also incur VAT at 20%, aligning with the new VAT rules for private schools 2025.
Transitional Arrangements:
- Draft legislation issued on 29 July 2024 outlines transitional provisions. Fees invoiced or paid between 29 July 2024 and 30 October 2024 will be treated as a supply occurring on the later of 1 January 2025 or the first day of the relevant term.
- Fees paid before 29 July 2024 will follow the VAT treatment in force at the time, assuming the fee rate for the term was set and known when payment was made.

How These Changes to VAT on Independent School Fees May Affect You

Understanding the implications of these changes to VAT on independent school fees is crucial for effective financial planning. The new VAT charges will increase the overall cost of private education and boarding services, which may impact your budgeting.

Next Steps and Seeking Advice

To prepare for these changes:

Review Your Current Fee Structures: Determine how the new VAT rules for private schools will affect your finances.
Plan for Increased Costs: Include the additional 20% VAT in your budgeting for future terms.
Consult with Experts: If you need guidance on how these UK budget 2024 VAT changes might impact you, contact us for tailored advice.

Stay Informed

We will provide more detailed updates after the budget announcement on 30 October 2024. Keep up-to-date on the latest VAT private education UK developments and their effects on your financial planning.

Contact Us

For help with understanding and preparing for the upcoming changes, please reach out to our VAT accountants. We’re here to assist you with navigating these important updates.

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August 3, 2024 By Katie Tax 0 Comments

Proposed Repeal of Furnished Holiday Lettings Tax Relief: What You Need to Know for 2025

The UK government has announced draft legislation to repeal the special tax treatment for furnished holiday lettings (FHL), with changes coming into effect on 6 April 2025 for individuals and 1 April 2025 for corporation tax. This shift will eliminate several tax advantages currently available to FHL landlords, aligning them with the rules applicable to other property businesses.

Key Changes to VAT on Furnished Holiday Lettings

Finance Cost Restrictions:
- From April 2025, loan interest on FHL properties will be subject to the basic rate of Income Tax. This change aligns FHLs with other property businesses under the new VAT on private school fees 2025 rules.
Capital Allowances:
- The new legislation will abolish capital allowances for new expenditures on FHL properties, only allowing relief for replacement domestic items. Existing capital allowances pools can still be claimed, but any new expenditure incurred from the effective date will follow standard property business rules.
Reliefs on Chargeable Gains:
- The proposed repeal will withdraw access to tax reliefs on chargeable gains for trading business assets. This includes the cessation of eligibility for Capital Gains Tax (CGT) roll-over relief, business asset disposal relief, and other related exemptions from 6 April 2025.
Pension Relief Calculations:
- Income from former FHL properties will no longer be considered in relevant UK earnings when calculating maximum pension relief, affecting how pension contributions are calculated.

Transitional Rules and Planning

Ongoing Capital Allowances: Existing FHL businesses can continue to claim writing-down allowances on their current capital allowances pool. New expenditure from the effective date will need to be considered under the general property business rules.
Integration into Property Businesses: After the repeal, former FHL properties will become part of the owner’s UK or overseas property business, integrating profits and losses from all properties within that business.
Carried Forward Losses: Losses from the FHL business can be carried forward and used against future profits of either the UK or overseas property business, providing some relief during the transition.
Anti-Forestalling Rule: Effective from 6 March 2024, an anti-forestalling rule will prevent tax advantages through unconditional contracts designed to secure capital gains relief under the current FHL rules.

How These Changes Affect You

The repeal of special tax treatment for FHLs will standardise tax rules, impacting financial benefits previously enjoyed by FHL landlords. It is crucial for property owners and investors to:

Review Tax Strategies: Assess how the removal of FHL tax advantages will affect your financial planning.
Adjust Financial Forecasts: Prepare for changes in capital allowances and reliefs under the new rules.
Seek Professional Advice: Consult with tax experts to navigate these transitions and optimise your tax position effectively.

Stay Informed

We will provide further updates as more details emerge. Keep up to date with the latest changes to ensure you’re prepared for the impact on your FHL properties.

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July 9, 2024 By Katie Business News 0 Comments

VAT on the costs of selling a subsidiary

When a holding company sells shares in a subsidiary, the VAT incurred on the professional fees involved would normally be irrecoverable, on the basis that a sale of shares is an exempt supply.

In a recent case a hotel group argued that a subsidiary was sold in order to finance the completion of construction of a new hotel and that there was a direct and immediate link between the raising of the funds and the group’s downstream activities of operating hotels. The Tax Tribunals were satisfied the VAT on the professional fees associated with the share sale was a general overhead of the group’s business and could be recovered as input tax. Based on the Upper Tribunal decision many other groups were advised to make protective claims for the recovery of input tax.

Unfortunately, the Court of Appeal have now rejected the taxpayers arguments and found in favour of HMRC, thus denying recovery of input tax on the associated professional fees in connection with the share disposal as that is an exempt supply.

Need more information?

We offer a wide range of services which are unique to your business. 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.

Our fantastic team at A&C Chartered Accountants are here to help.

July 4, 2024 By Katie Business News 0 Comments

What is a pool car?

The conditions for a company car to be treated as a pool car are set out in the employment income legislation:

(a) the car was made available to, and actually used by, more than one employee,

(b) the car was made available, in the case of each of those employees, by reason of the employee’s employment,

(d) in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and

(e) the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

Need more information?

We offer a wide range of services which are unique to your business! 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.

Our fantastic team at A&C Chartered Accountants are here to help.

June 5, 2024 By Katie Business News 0 Comments

HMRC official rate of interest remains at 2.25%

HMRC have announced that the official rate of interest will remain at 2.25% for 2024/25, despite the Bank of England Base Rate currently standing at 5.25%. The official rate of interest is used to calculate the income tax charge on the benefit of employment related loans and the taxable benefit of some employment related living accommodation. These rates used to fluctuate in line with base rate, and changed several times a year, but in recent years HMRC has fixed the rate for the whole tax year making the calculation of the taxable benefit easier to compute.

For those employers including beneficial loans on form P11d for 2023/24 the official rate to be used is 2.25%. The charge applies where the amount of the loan exceeds £10,000.

Should director/Shareholders take advantage of this lower rate?

As mentioned above the HMRC rate of interest on beneficial loans looks very attractive compared to the Bank of England Base rate of 5.25%, and much higher rates charged by banks for unsecured loans.

Note that where loans are made to participators (broadly shareholders) of a close company there is potentially a special tax charge on the company on any loan still outstanding 9 months after the end of the accounting period. The charge is currently 33.75%, the same as the higher rate of tax on dividend income. This tax charge is only repaid to the company after the loan to the participator is repaid or written off.

For example, Fred, the managing director and controlling shareholder of Bloggs Ltd is loaned £100,000 interest free on 6 April 2023. No repayments are made in the year ended 31 March 2024.

The company would need to show a taxable benefit in kind on Fred’s 2023/24 P11d of £2,250 (2.25%)

If Fred repays the loan in full before 31 December 2024 there would be no special charge on the company although Fred would be assessed on the beneficial loan for the 9 months that the loan was in existence in 2024/25.

Note that there are anti- “bed and breakfast” rules to counteract the situation where the loan is readvanced by the company. The anti-avoidance would not apply where the loan is cleared by crediting a bonus or dividend to Fred’s loan account.

If however, only £60,000 was repaid by Fred before 31 December 2024 leaving £40,000 outstanding then there would be a tax charge on the company of £13,500 (assuming 33.75% dividend rate continues) which would be payable in addition to the company’s corporation tax liability for year ended 31 March 2024.

The company would show a taxable benefit in kind on Fred’s 2024/25 P11d based on the official rate of interest on beneficial loans for 2024/25.

If the company then decides to write off or waive the outstanding loan in year ended 31 March 2025 the £13,500 would be refunded. However, Fred would be assessed on the £40,000 as an income distribution (dividend) arising at the date of waiver in 2024/25.

Need more information?

We offer a wide range of accountancy services for businesses who are just getting going!

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, don’t hesitate to contact us.

June 3, 2024 By Katie Business News 0 Comments

Should employees reimburse their employer for private fuel?

Where a company car is provided for use by an employee or director there is a benefit in kind taxable on the employee based on the original list price of the vehicle multiplied by the CO2 emissions percentage for that vehicle. There is an additional benefit in kind where private fuel is paid for by the employer, which also needs to be reported on form P11d unless the employer has arranged with HMRC to deal with the tax on the benefits via monthly payroll.

Note that unless the employee fully reimburses the employer for private mileage, the additional benefit in kind is based on a notional list price of £27,800 multiplied by the CO2 emissions percentage for that vehicle. That could be as much as 37%, £10,286 for a car with high CO2 emissions. That would mean £4,114 income tax for a higher rate taxpayer. That would be an awful lot of fuel!

In addition, there would be £1,419 class 1A national insurance contributions payable by the employer.

The table at the end of this newsletter sets out the HMRC advisory fuel rates that apply from 1 June 2024. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years.

Note that this is an all or nothing benefit and, unless there is full reimbursement, there is an additional taxable benefit. The deadline for reimbursing private fuel is 6 July 2024 for the 2023/24 tax year.

Need more information?

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.

Our fantastic team at A&C Chartered Accountants are here to help.

June 1, 2024 By Katie Business News 0 Comments

P11D form: Report employee benefits by 6 July

P11d forms for reporting expenses and benefits in kind provided to employees and directors in 2023/24 need to be submitted by 6 July 2024. Note that paper forms are no longer acceptable; the return must be made online using PAYE Online for employers or commercial software.

Remember that reimbursed expenses no longer need to be reported where they are incurred wholly, exclusively and necessarily in the performance of the employee’s duties. Dispensations from reporting are no longer required, although HMRC would expect internal controls to be in place to ensure that the expenses qualify.

Note also that trivial benefits of no more than £50 provided to employees need not be reported. This typically covers non-cash gifts to employees at Christmas and on their birthdays and can include gifts of food and alcohol. Again, the employer needs to keep a record of the benefit provided and the justification. It should not be provided as a reward for past or future service.

Need more information?

Need help with P11d forms and PAYE?

Our team provides payroll advice for companies across all sectors, from charities to construction firms.

If you want to learn more about how the team can help, or simply want some start-up advice from a trusted accountant, don’t 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.

May 7, 2024 By Katie Business Advice 0 Comments

Investing an unquoted trading company

Investing an unquoted trading company

If you are considering lending money to, or subscribing for shares in, an unquoted trading company then, like many investments, there is always a risk that you may lose your money.

However, there is potentially tax relief for the lender if the loan meets certain conditions, in particular the money lent is used by the borrower wholly for the purposes of its trade, and the trade does not consist of or include the lending of money.

The tax relief is by way of a capital loss that can be set against gains in the same or future tax years. In order to make a claim for capital loss relief, any outstanding amount of the principal of the loan must have become irrecoverable, the claimant must not have assigned their right to recover that amount, and the claimant and the borrower were not each other’s spouses or civil partners, or companies in the same group, when the loan was made or at any subsequent time.

Capital loss on shares in an unquoted trading company

Where an individual subscribes for a new issue of shares in an unquoted trading company, there is an even more generous form of loss relief where those shares are disposed of at a loss, including the situation where the shares have become worthless. In that situation, it is possible to make a negligible value claim which creates a deemed disposal and reacquisition of the shares at that low value, thereby creating a capital loss. A further claim can then be made to set that capital loss against the subscriber’s income in the year of the loss and/or the previous year. The attraction here is the income tax relief could save tax at 40% for higher rate taxpayers and 45% for additional rate taxpayers, as opposed to a capital gains tax saving at a maximum 24% (on residential property gains).

Converting loans into shares

As mentioned above, where a loss is made on a loan to an unquoted trading company, relief for that loss may claimed against capital gains, whereas the loss on subscriber shares can be set against income, saving tax at higher rates. It is possible for the lender to be issued with shares in the company in satisfaction of the loan, which potentially would allow the investor to claim relief for any subsequent loss against their income. Note that where the company is already insolvent at the time that the shares are issued, no capital loss will arise and HMRC are likely to challenge the loss claim, as they have done successfully in two recent tax cases.

Need more information?

Our fantastic team at A&C Chartered Accountants are here to help.

May 6, 2024 By Katie Business News 0 Comments

Tax Relief Under The Enterprise Investment Scheme (EIS)

Are you looking to reduce your tax bill?

As a forward-thinking accountancy firm, we pride ourselves on finding the best ways to become more tax efficient. We aim to save our clients more money on tax than they spend on our fixed fees.

With this in mind, two such opportunities in recent years are the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

In this article, we’ll explore both options and explain how you can significantly reduce your tax bill.

What is the Enterprise Investment Scheme?

The idea behind the Enterprise Investment Scheme (EIS) is simple. The UK government wants to encourage private investment into smaller companies to aid their growth and stimulate the British economy. The EIS is their means of doing that by providing a generous tax relief to qualifying investors.

Which companies are eligible for EIS?

To be eligible for EIS, companies:

Must be unlisted (not on the main London Stock Exchange, or any other)
Must not be controlled by another company
Must not control any non-qualifying subsidiaries
Must have gross assets of ≤ £15 million before investment and ≤ £16 million after
Must have fewer than 250 employees
Must not raise more than £5 million per year under EIS/SEIS/VCT combined, and no more than £12 million total
Must have a permanent base in the UK
Must not have been trading for more than seven years

The rules and thresholds change slightly for knowledge-intensive companies.

If you’re a business owner and you think your company may qualify for investment under the scheme, we suggest reading the excellent guide from the British Business Bank to learn more about applying.

What tax relief do EIS investors receive?

If you invest in an EIS-qualifying company, you can get quite substantial tax reliefs.

Income tax relief

As long as you’re not connected with the company, you can claim income tax relief of 30% of the amount that you invest in qualifying EIS companies. This is up to a limit of £1 million each tax year (or up to £2 million if at least £1 million of that is invested in knowledge-intensive companies). Thus, a £10,000 investment would result in a £3,000 reduction in your income tax liability.

The connected persons tests are complicated. For example, directors cannot claim EIS tax relief if, at the time the shares are issued, they are a paid director of the company unless the payment is a ‘permitted payment’. They may, however, become a paid director after their investment under the ‘business angel’ rule.

Capital gains exemption

The value of your investment may grow over time if the business you choose is successful. Normally, this would incur a capital gains tax liability, should you decide to sell.

However, capital gains from EIS-qualifying companies are exempt from tax, provided that:

The shares are held for at least 3 years
The company still qualifies for EIS

Loss relief

The EIS scheme is for startups and early-stage businesses. Naturally, many of these types of businesses fail. So, first and foremost, please be careful and seek professional advice before proceeding with any investment.

However, if your investment fails, then you can offset your loss against income tax.

Capital gains deferral

If you have a wider portfolio of investments, it’s possible to defer capital gains on any asset disposal within your portfolio by reinvesting the gain in qualifying EIS shares.

Inheritance tax relief

After 2 years, EIS shares qualify for Business Relief. This means the shares will qualify for relief from inheritance tax if you were to pass away.

This used to be 100% relief, but from April 2026, that will be limited to the first £1 million of qualifying assets. The remainder will be eligible for 50% relief.

That means, if you held £2 million worth of EIS shares upon passing:

The first £1 million qualifies for 100% Business Relief, so it’s completely exempt from inheritance tax for your beneficiaries.
The remaining £1 million qualifies for 50% relief, so only £500,000 is chargeable to inheritance tax.
At the standard IHT rate of 40%, your estate would face a tax bill of £200,000 on those shares, instead of £800,000 if there were no relief at all.

What is the Seed Enterprise Investment Scheme?

The Seed Enterprise Investment Scheme (SEIS) takes the principle of the EIS a step further. It allows investors to put their money into very early-stage, “seed” companies. This comes with even greater tax reliefs, but it’s also much riskier.

Which companies are eligible for SEIS?

SEIS-eligible companies are much smaller in scale compared to EIS-eligible companies. To be eligible for SEIS, companies:

Must be unlisted (not on the main London Stock Exchange, or any other)
Must not be controlled by another company, or have ever been so
Must not control any non-qualifying subsidiaries
Must have gross assets of ≤ £350,000 before investment
Must have fewer than 25 employees
Must not have previously raised money from the Enterprise Investment Scheme (EIS) or from a venture capital trust (VCT)
Must have a permanent base in the UK
Must not be a member of a partnership

What tax relief do SEIS investors receive?

If you invest in an SEIS-qualifying company, you can get much larger tax reliefs, although the total investment allowance is capped at £200,000 per year.

Income tax relief

Again, you must not be connected to the company to claim income tax relief under SEIS.

But as long as you meet the criteria, you can claim income tax relief of 50% of the amount that you invest in qualifying SEIS companies. Thus, a £200,000 investment would result in a £100,000 reduction in the investor’s income tax liability.

Capital gains exemption

Same as with EIS shares, any growth in the value of your investment is exempt from capital gains tax provided that:

The shares are held for at least 3 years
The company still qualifies for SEIS

Loss relief

If your investment fails, then you can offset your loss against income tax.

For example, say you invest £20,000 in a SEIS company. You immediately get £10,000 back as 50% income tax relief. If the company fails, you can claim loss relief on the remaining £10,000. At 45% tax, this gives you £4,500 back. So your real loss is only £5,500, not the full £20,000.

Capital gains reinvestment relief

Under SEIS, you can claim 50% capital gains tax (CGT) reinvestment relief. This means if you realise a gain elsewhere (say £10,000 from selling shares) and reinvest it into SEIS, half of that gain (£5,000) becomes exempt from CGT, reducing your tax bill. Remember that any profit you make when selling your SEIS shares after 3 years is completely free from CGT, so this an effective route for reducing CGT liabilities long-term (but carries a high level of risk).

Inheritance tax relief

After 2 years, SEIS shares qualify for Business Relief. This means the shares will qualify for 100% relief from inheritance tax if you were to pass away.

The same IHT relief rules apply for SEIS as they do for EIS.

Need more information?

We offer a wide range of services for individuals and businesses interested in tax-efficient investments.

If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant, please don’t hesitate to contact us for a free consultation.

May 5, 2024 By Katie Business News 0 Comments

Official rate of interest for 2024/25 remains at 2.25%

HMRC have confirmed that the official rate of interest for employee and directors’ beneficial loans remains at 2.25% for 2024/25, despite a Bank of England base interest rate of 5.25%.

This means that where the employer lends an employee more than £10,000, the taxable benefit would be the difference between 2.25% and the amount paid on the outstanding loan.

Need more information?

Our fantastic team at A&C Chartered Accountants are here to help.

May 4, 2024 By Katie Business News 0 Comments

Late night taxis paid by employers

Payments by the employer for taxis to take employees home late or at night are exempt from tax if:

the failure of car sharing arrangements conditions are satisfied (see below); or
all 4 late night working conditions are satisfied; and
the number of such journeys for which a taxi has been provided for that employee in the tax year is no more than 60.

There are 4 late working conditions, all of which must be satisfied.

The employee is required to work later than usual and until at least 9pm.
This occurs irregularly.
By the time the employee ceases work, either:
1. public transport has ceased, or
2. it would not be reasonable to expect the employee to use public transport.
The transport is by taxi or similar road transport – this condition is not contentious and is not referred to again in this guidance.

The 60 journeys is a single limit that applies to late night journeys and failure of car sharing arrangements together. This means that journeys under both headings must be added together when working out whether or not the 60 journeys limit has been reached.

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May 3, 2024 By Katie Business Advice • Tax 0 Comments

Working From Home: Tax Relief & Allowances Explained

If you regularly work from home, you may wonder whether there are tax reliefs available. After all, working from home means you’ll likely use more water, electricity, and gas to keep you warm, make a cup of tea, heat lunch and more – like you would if you were in an office. The difference is that instead of your workplace fronting the cost of your energy usage throughout the working day, it’s added to your household bills instead.

In this post, we’ll take a look at the current rules and explain how they apply whether you’re at home permanently, work on a hybrid basis between the office and your home, or even if you’re self-employed.

I work from home. Are there any tax reliefs or allowances available?

Yes, there are tax reliefs and allowances available to those who work from home, but only under certain conditions.

The home working allowance allows employers to reimburse employees for any additional costs incurred by working from home. The can be any amount, but there’s a threshold of £6 per week (or £26 a month for those paid monthly) – anything over this amount requires additional admin and evidence of the costs, whereas payments below or equal to the threshold require no record-keeping or proof of compliance.

Of course, some employers simply won’t wish to make additional payments like this. So there’s another option, too: employees can claim tax relief from HMRC.

You can claim relief on £6 a week at your income tax rate, with no evidence or records required. This relief equates to:

£62.40 per year for basic rate taxpayers (20% of £312)
£124.80 per year for higher rate taxpayers (40% of £312)

Or you can claim relief on your actual expenses, but you will need clear records of everything you’ve spent, and there are only a few costs that you can legitimately claim for (business calls and energy usage).

Who is eligible for working from home tax relief?

Employees can only claim tax relief if they have to work from home under a homeworking agreement. For example, if:

Their job requires them to live far away from the office
Their employer does not have an office
The office is closed every Friday, and employees are required to work from home that day.

In contrast, tax relief cannot be claimed if the employee voluntarily chooses to work from home.

These rules have changed in recent years. Before the global COVID-19 pandemic, employees needed a home working arrangement with their employer under which they were required to work from home on a regular basis to be eligible for the home working allowance or tax relief.

During the pandemic, the government relaxed these conditions to support those working from home due to the COVID-19 travel and social distancing rules. Employees could claim the home working allowance if they were required to work from home for any period.

This could be paid by their employer, or, where it was not paid by the employer, employees could claim relief for £6 a week against their employment income for a tax refund from HMRC. Those relaxed rules applied for the 2020/21 and 2021/22 tax years.

However, something many employers and employees have missed is that from 6 April 2022, the rules reverted to the strict statutory position.

What if I’m self-employed?

If you’re self-employed and working from home, the rules are slightly different. You can claim tax relief on some of the costs associated with your home office. There are two ways to do this:

1. Simplified expenses (Flat-rate method)

Under the simplified expenses scheme, you can use a flat rate based on the hours you work from home each month, as follows:

25 to 50 hours per month: £10 per month
51 to 100 hours per month: £18 per month
101 hours or more per month: £26 per month

This method simplifies record-keeping, as you don’t need detailed evidence of your actual costs.

2. Actual costs method

If you don’t think the flat rate method will accurately cover all of your costs, then you can calculate the actual proportion of your household costs that relate to your business activities. Allowable expenses include:

Heating and lighting
Phone and broadband bills (business proportion only)
Council tax
Mortgage interest or rent (business proportion only)
Home insurance (business proportion only)
Repairs directly related to your workspace

You’ll need to carefully record your expenses and be able to demonstrate how you calculated the proportion used for business purposes.

How do I claim tax relief for working from home?

Making a claim is really simple. If you’re eligible, some employers may pay you the £6 a week allowance. However, most employees will have to claim tax relief. To do that:

Decide whether you wish to claim relief on £6 a week or your total expenses
Retain evidence of your home working arrangement
Retain evidence of your costs (if you wish to claim against total expenses)
Claim the tax relief from HMRC’s portal
1. Alternatively, if you submit an annual self-assessment, claim it through your tax return instead.

Can I backdate my claim?

Yes, you can backdate your claim. As long as you meet the eligibility criteria for each year you’re claiming, you can backdate claims for up to four previous tax years.

I work from home, but I’m required to travel to the office every so often. Can I claim tax relief on the travel expenses?

Whether or not an employee’s home is a workplace does not affect the availability of tax relief for travel expenses. Travel expenses from home to a permanent workplace will only qualify for tax relief if the journey qualifies as travel in the performance of the duties of the employment.

Even though it may have been accepted that the employee’s home is a workplace, it does not necessarily follow that they’ll be entitled to tax relief for the cost of travel between their home and a permanent workplace.

This is because the place where an employee lives will ordinarily be down to their personal choice. The expense of travelling from their home to any other place is a consequence of that personal choice, not an objective requirement of the job.

HMRC guidance states that where an employee performs substantive duties of their employment at home as an objective requirement of the job, they may accept their home as a workplace for the purposes of the ‘travelling in the performance of the duties’ rule. Where this is the case, the employee will be entitled to tax relief for the expenses of travelling from home to other workplaces, as their travel is in the performance of their duties.

HMRC will usually only accept that working at home is an objective requirement of the job if the employee needs certain facilities to perform those duties, and those facilities are only practically available to the employee at their home.

HMRC states that they will not accept that working at home is an objective requirement of the job if the employer provides appropriate facilities in another location that could be practically used by the employee, or the employee works from home as a matter of choice.

Even where the employee works at home as an objective requirement of the employment, tax relief for the cost of travel between their home and their permanent workplace will only be due for travel made on days where the employee’s home is a workplace.

Only on those days is the employee travelling between 2 workplaces. On other days, the employee is travelling between their home and a permanent workplace, which is ordinary commuting.

Need more information?

The rules around working from home are a little confusing. We hope our post has helped make things a bit clearer, but if you have any further questions or would like to discuss your situation with one of our team members, then please get in touch.

May 2, 2024 By Katie Business News 0 Comments

HMRC publish updated guidance on work travel

HMRC publish updated guidance on work travel

Travelling from home to an employee’s normal workplace does not qualify for tax relief. This is referred to as “ordinary commuting and, furthermore, if the costs of the journey are reimbursed by the employer, those costs are taxable. There are exceptions to this rule, in particular where the employer pays for the employee to travel home in a taxi safely late at night.

Travelling to a “temporary workplace” is a qualifying business journey and, where the costs are reimbursed by the employer, there is no taxable benefit. Note also that any associated subsistence costs such as overnight hotel accommodation costs are also a tax-free benefit. HMRC Booklet 490 provides detailed guidance on employee travel, together with comprehensive examples (this is an online document these days).

With more and more employees working from home these days, for at least one day a week, attention should be paid to the latest HMRC guidance on such arrangements.

Need more information?

Our fantastic team at A&C Chartered Accountants are here to help.

April 7, 2024 By Katie Business News 0 Comments

Get ready for more research and development changes

Get ready for more R&D changes

On top of the major changes to research and development (R&D) tax relief that took effect from 1 April 2023 there are yet more changes that take effect from 1 April 2024.

For accounting periods commencing on or after 1 April 2024, companies carrying out qualifying R&D will be entitled to a 20% expenditure credit. The 20% is calculated on the amount of qualifying expenditure. Qualifying expenditure is extended to include subsidised expenditure from 1 April 2024, although R&D carried out overseas will no longer qualify unless the work cannot be undertaken in the UK.

“R&D intensive” companies that make trading losses will continue to be entitled to a tax refund instead of the expenditure credit. The definition of “R&D intensive” is reduced from 40% to 30% from 1 April 2024 which means a company that spends at least 30% of total expenditure on qualifying R&D will now be entitled to the more generous tax refund.

R&D tax relief continues to be a complex area and we can work with you to help you prepare a valid claim as HMRC are now scrutinising and rejecting an increasing number of claims.

Need more information?

Our team works hard to ensure they create smart and effective tax-efficient solutions for our clients.

If you want to learn about how we can help you claim R&D tax relief, or simply want some tax advice you can trust, then please don’t hesitate to contact us. You can fill out a form below or call us on 0161 962 1855.