Research and Development R&D

31 May 2016

The R&D Scheme is an incentive for companies operating in the UK to increase their investments and spending’s on innovative projects where they seek to achieve an advance in science or technology or look to overcome a scientific or technological uncertainty.

HMRC first Introduced R&D tax credits for SME’s in 2000. A similar regime was introduced in 2002 for larger companies and then the research and development expenditure credit (RDEC) was introduced by the Finance Act 2013 from the 1 April 2013.

The two main criteria for eligibility are “advancement” and “uncertainty”, if your company is taking a risk by innovating or improving a process, product or service then it could potentially qualify for R&D tax credits. These tax credits could be claimed on the revenue expenditures such as staff costs, subcontractors and consumable items.

In November 2015 HMRC introduced R&D Advance Assurance to encourage more claims and to provide certainty to companies that they will receive R&D tax relief.

Companies who have not previously applied for R&D and with annual turnover of £2M or less who have less than 50 employees can apply for R&D Advance Assurance.

Another benefit of advance assurance is that R&D claims will hold for three years without further enquiry from HMRC, although assurance is expected to face a greater scrutiny than some of the smaller R&D claims.

You could use the link below to apply for R&D Advance Assurance or alternatively contact us to help you with the application process. http://bit.ly/1RcunO2

Auto Enrolment

23 May 2016

Under the Pensions Act 2008 every UK employer must register certain members of staff into a pension scheme. This should be done automatically if the member of staff qualifies, however this isn’t so automatic for employer.

Every employer must find out their staging date and prepare for it. Using your PAYE reference number and the link below you can find out your staging date. This is the date that you must be implementing auto enrolment and compliant with the new rules otherwise you could be penalised by HMRC.

http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx

If your business doesn’t have any staff other than directors then you do not need to worry, unless more than one director has a contract of employment.

Table below shows which employees either have the right to be enrolled or must be enrolled.

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If the employer has no employees that have to or want to be registered they do not need to register for a pension scheme in case the employee changes their mind.

Any employee between the ages of 22 to state pension age (SPA) who earn more than £833 monthly must be registered for a pension scheme and the employer must be making contributions even if the employee only passes the threshold due to a bonus or due to working extra hours.

For more information on auto enrolment please contact us or get in touch today by calling 0203 039 3993.

Loans and Disguised Remuneration

20 May 2016

A significant change in UK tax law has been proposed in a technical note issued by HMRC on 16th March 2016.

Under the proposal any loan or debt outstanding on 5th April 2019 that has arisen from a disguised remuneration scheme will be subjected to tax and national insurance. This will catch loans made at ANY time, even before the disguised remuneration legislation was conceived.

The proposed charge is controversial as it is another attempt by HMRC to introduce retrospective taxation in the UK, something which is against the spirit of Article 7 of the Human Rights Act.

A technical consultation is set for this summer to ensure the legislation is targeted and effective, however the worry is this will not be a genuine consultation.

HMRC’s view is disguised remunerations schemes do not and have never worked. Nevertheless they felt it necessary to introduce the disguised remuneration legislation in 2011 to ‘put it beyond doubt’.

The recent technical note however shows HMRC’s hand has not been as strong as it made out.

At point 12 the note implies that any resultant tax liability from the disguised remuneration is actually that of the employer and therefore further legislation is required prior to the proposed charge on 5th April 2019 to enable the liability to be passed onto the employee.

HMRC has previously given users of such schemes settlement opportunities, which if take up would give them certainty. Under one such settlement opportunity after agreeing the quantum HMRC and the taxpayer entered into a contract agreeing the position, often HMRC would have to concede on a number of tax years as they had not raised enquiries within the statutory time limits.

The proposed charge will hit those that entered into settlement opportunities in good faith with HMRC, although the years that were open to HMRC and for which tax/nic was paid for won’t be charged a second time, the years that HMRC had missed due to the statutory time limits will now fall back into charge.

What loans and debts will be caught and how the quantum will be established remains to be seen.

So far we’ve considered the moral aspects of the changes, but what about the cold hard legal aspects?

One of the highest profile cases in this area is the Murray case. The most recent hearing was in November 2015 where HMRC won. The taxpayer had previously won the first round at the First tier Tribunal. The case is set to be heard for a final time at the Supreme Court towards the end of 2016. The case involved the use of an Employee Benefit Trust and Loans to the payers of Rangers Football Club.

The proposed legislation puts us in a rather odd situation. If, as some expect, the Murray case is successful in the Supreme Court there will be no celebrations. In this eventuality a Judge will have declared the scheme lawful and effective, however a charge will still be imposed on the players on 5th April 2019.

Even if Murray fails many of the schemes HMRC will claim fall within this charge would probably succeed at litigation.

How can a tax and national insurance charge be levied on a past event that was entirely lawful at the time? Sadly HMRC are Judge, Jury and Executioner.

All is not doom and gloom, if you have a loan balance you fear may be caught by the charge in April 2019 please get in touch on 0203 039 3993, once the draft legislation is released and has been analysed we should be in a position to explore your options.

As an Employee What Expenses can I claim?

13 May 2016

Business Mileage

Business mileage is mileage incurred to complete the duties of your work. It does not include travel from home to permanent place of work.

Broadly a permanent place of work is where an employee attends or is expected to attend for no more than 24 months.

Workers can claim a deduction against their taxable income of £0.45 for up to 10,000 miles and £0.25 for any subsequent miles.

If worker is reimbursed for mileage at a lower rate they may still claim a deduction dependant on the rate that the employer pays them per mile.

If you wish to claim mileage allowance you must claim within 4 years after the end of tax year. If you have missed out on prior years we could work back and claim for the years that you haven’t already claimed.

Working from home

There are two ways to calculate the cost of working from home.

The first and easier way would be to claim up to £4p.w HMRC have published this rate and are unlikely to enquire into a claim at this level.

The second method is more appropriate where carrying out a larger percentage of your duties from home.

Using this method you could work out the actual expenses using the number of rooms and the time spent working from home to reach a percentage to claim against;

·         Phone bills and internet

·         Gas / electricity

·         Water costs

·          Council tax

·         Mortgage interest / rent

Uniform

Although you can’t claim on the initial cost of work clothes you can however claim on replacement or cleaning costs of specialist clothing.

Workers can claim either for actual costs or the “flat rate deduction”, which HMRC has agreed are expected to be spent each year for employees in different occupations.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32712

Telephone & Internet

Self-employed individuals can claim part of their personal phone charges if they use it to complete their work. They could apportion a percentage of business use and claim that through their self-assessment, as long as it’s a fair percentage. It does not work this way for employees.

An employer can provide any employee with a mobile phone to use for business, personal use is irrelevant as long as the phone line and handset was purchased in the businesses name.

If you are a director of your own company this would be a relatively easy benefit to arrange.

If the phone line or handset was not purchased under the company name then you cannot claim for the cost of hand set or phone line however you could claim for the cost of business calls made, this would be particularly difficult due to the way the phone packages work (free minutes), the rules are if you cannot distinguish between business or private costs then you cannot claim expenses.

Many individuals miss out on claiming legitimate expenses against their income and end up overpaying tax, if you require more information or to see if you are claiming the right amount of expenses please contact us or call us on 0203 039 3993.

Tax Rates for 2016-17

06 May 2016

Changes to Income Tax 

The basic rate threshold is now set at £32,000 which means earnings in excess of the personal allowance up to this threshold are taxed at 20%.

Personal allowance is now set at £11,000.

The higher tax rate bracket is at 40% on earnings between £32,001 and £150,000.

Income over £150,000 would fall into the additional tax rate which is taxed at 45%.

Personal allowance will be reduce on income over £100.000 at rate of £1 for every £2 on income, which means at £120,000 personal allowance is wiped out. The £20,000 earned over £100,000 is effectively taxed at 60%.

Dividends

The new dividends regime is now implemented. Under the new regime the first £5,000 is tax free, after that the basic rate tax is set at 7.5%. Dividends at higher rate are taxed at 32.5% and 38.1% at additional rate tax.

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Capital Gains Tax (CGT)

Capital gains tax was reduced from 18% to 10% at the basic rate and from 28% to 20% above basic rate of earning, although this reduction does not apply to residential property which will continue to be taxed at the previous higher rates.

VAT

VAT compulsory registration threshold is set at £83,000 in any 12 months period.

If you receive goods worth more than £83,000 from the EU in the UK then you must register for VAT.

You must register within 30 days of your business turnover exceeding the threshold however you may wish to register voluntarily if your turnover is below the threshold of £83,000 or if its advantageous to your business, perhaps you sell mostly to UK vat registered businesses?

To see how any of the information above affect you or your business please contact us or get in touch today by calling 0203 039 3993.

 

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