Business

Do you know enough about your suppliers?

1 min read

If you fail to carry out checks on suppliers of labour to your business, you could become liable for unpaid National Insurance Contributions and denied input VAT claims.

HMRC expect businesses to carry out adequate checks on their suppliers to allow them to make informed decisions as to their integrity.

HMRC’s guidance on the matter is based around three principals:
Check – Know your own risk – legal, financial, tax and social obligations, and those of your suppliers.
Act – Carry out robust due diligence on your suppliers. If risks are identified do not ignore them, act to mitigate or remove the risk completely.
Review – Effective due diligence needs continuous monitoring and review.

HMRC have recently updated their extensive guidance on their website to assist businesses in following these three principals. It could prove very costly for businesses that fail to meet these obligations, as should HMRC look to recover unpaid taxes from the business, the amounts involved are likely to be very large. It is also possible that HMRC would seek to impose a penalty and fine.

How we can help

We aren’t just your average accountants. We offer a wide range of business advisory services to help you make the right decisions for your business to grow and improve. With over 40 years experience our team is dedicated to really understanding your business. We believe by staying up to date with not only current but changing legislation and industry news we are better placed to help our clients and their businesses succeed.

If you would like to know how Loucas can assist you please do not hesitate to contact us.

Read our related blog on 5 ways to make sure your business gets paid faster

Garden Office Tax Considerations

2 min read

With most of the working population working from home right now, many businesses are considering a permanent change to their working environment and we are being regularly asked about the pros and cons of a garden office.

There are two main considerations when looking at installing a garden office on the grounds of your residential property for business use:

  • will it be solely used by the business or
  • will there also be an element of private use (e.g. as a playroom, hobby room or overnight accommodation for guests).

The treatment of the garden office costs, various tax implications and some other additional points hinge on which of those options is chosen. Each individual circumstance may be slightly different, so it’s always good to seek specific advice but the following table outlines the broad considerations, based on a Limited Company purchasing the garden office as a company asset.

Initial Purchase of structure

The structure will be an asset of the company but no tax deduction is available for cost of the structure itself.

It is possible to claim capital allowances on certain elements such as power supply, heating and thermal insulation as well as fixtures and fittings. It is a good idea to obtain breakdown of the cost of these allowance items.

VAT

If VAT registered you will be able to reclaim the VAT on the cost of the structure and items mentioned above. If there is private use of the office then an appropriate apportionment should be made.

Running Costs

These can be claimed as tax deductible, again an appropriate restriction must be made for any private usage.

Capital Gains Tax (CGT)

Ordinarily, the disposal of a primary residence is exempt from CGT. If the office is used solely for business then this element of the property may become liable to CGT.

This is not an issue of there is some private use of the office.

Benefit in Kind

If there is private use of the office then an annual benefit in kind charge will occur. This is calculated by using the assets made available for private use rules and could be as high as 20% of the purchase price per annum.

COVID-19 Business Support Measures Update

2 min read

The Government have recently issued further guidance on two of the support packages available to businesses affected by COVID-19.

Coronavirus Job Retention Scheme (“CJRS”)

The updated guidance on the CJRS sets out the procedures following the changes that come into force on 1 July 2020.  The major change on 1 July will be that employers will be able to bring back employees on a part time basis.  The guidance covers in detail how the furlough grant should be calculated in this situation. 

The CJRS will come to an end on 31 October with the level of support being reduced as from 1 August.

  • June and July – The level of support is be unchanged
  • August – the Government will pay 80% of wages up to a cap of £2,500 and employers will pay ER NICs and pension contributions for the hours the employee does not work.
  • September, the Government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
  • October, the Government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.

Self-Employment Income Support Scheme (“SEISS”)

The deadline for claiming the first grant under the SEISS is 13 July.  All claims must be made on or before this date.  To find out if you are eligible to make a claim follow this link. 

Details of the second and final grant for self employed individuals have been released on the .GOV website.  Eligible individuals can claim a taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profit, and capped at £6,570 in total.

The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus when applying for the second and final grant. An individual does not need to have claimed the first grant in order to be eligible for the second and final grant.

Applications to make a claim for the second grant will open in August 2020.

If you have any questions, our team of expert Accountants would be happy to assist.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

Why Consider a Bounce Bank Loan

2 min read

In an attempt to help businesses that were unable to access funds through the Coronavirus Business Interruption Loans (CBILS), the treasury recently announced the Bounce Back Loan Scheme (BBLS).

The terms of these loans have now been confirmed as follows:

  • Loans range from £2,000 up to 25% of a business’ turnover to a maximum of £50,000
  • 100% Government backed loan with no other security required
  • The loans are for a period of six years
  • There are no interest charges or repayments due in the first year
  • A low interest rate of 2.5%
  • No early repayment charges
  • No arrangement fees

To be eligible for the BBLS, in general terms, you need to be a business in the UK, have been affected by Coronavirus and not using CBILS.

Why consider taking out a Bounce Back Loan?

  • Cash flow

A Bounce Back loan would provide cheap working capital for your business. 

  • Repayment of existing borrowings

Perhaps consider whether you have any current business borrowings such as hire purchase agreements, bank loans and overdrafts or credit card debt that could be settled by using the funds raised from a Bounce Back loan.  It would be important to check that there are no early repayment charges on existing agreements before doing this.

  • Funding of capital expenditure

If you are considering investing in new equipment for your business, a BBLS loan could be a more attractive alternative to traditional business borrowing options.

Although at the time of writing it has not been announced how long the BBLS or CBILS will be available, it is unlikely that it will be indefinitely and therefore it is sensible to consider this sooner rather than later.

You can find more details on the Bounce Back loans and indeed the larger Coronavirus Business Interruption Loans on the British Bank Website.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

Supporting businesses impacted by COVID-19

3 min read

In an interconnected global economy, the new coronavirus (also known as COVID-19) is affecting UK businesses and their operations. It has resulted in restrictions on travel and public gatherings, as well as supply chain disruptions and market uncertainty. We share some practical steps you can take to help manage the impact of COVID-19 on your business.

This page is updated regularly to give the latest news and resources for business owners. We’ve pooled together all our experts’ advice and sources of support together in one place. This should make it easier for you to find useful information and to know what your next steps are at this challenging time.

Keep up to date with the latest developments and advice        

You can read the latest guidance and advice to businesses on the GOV.UK website. The CBI have also published detailed guidance on their website.

Have a plan

In case all or some of your workforce have to self isolate put together a plan as to how you will manage this process now.  Here are a few practical things to consider:

  1. How will you communicate to your customers what is happening
  2. Can you divert your phone system
  3. How will the workforce communicate with each other if working from home
  4. Do you have up to date contact details for all your workforce
  5. If staff would need to connect to a computer network remotely check they can do this now
  6. Is it possible to split departments and segregate from one another to reduce the risk that everyone in a single department is affected  

Keep your staff informed

Firstly, keep everyone updated as to what you are doing to reduce the risk of exposure in the workplace.  Ensure everyone knows what they should do in the event that they do experience symptoms.

To avoid uncertainty you should also communicate to your staff the company sickness policy and how this would apply in different circumstances.

Financial support for businesses

The Government announced in the Budget a number of measures they are introducing to support businesses that are affected by COVID-19.

These include:

  • a statutory sick pay relief package for SMEs
  • a Business Rate Relief for small businesses and pubs
  • small business grant funding of £3,000 for all business in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief
  • the Coronavirus Business Interruption Loan Scheme to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance
  • the HMRC Time To Pay Scheme

Full details can be found on the GOV.UK website

Struggling to pay your tax because of COVID-19

If you are having difficulty or believe you will have difficulty paying your taxes on time HM Revenue & Customs have set up a new Coronavirus helpline.

Where possible you should call HMRC before the tax liability falls due to discuss a payment plan.  If you do not contact HMRC and don’t settle your liabilities on time you may incur a penalty.  HMRC Coronavirus Helpline – Telephone: 0800 015 9559

Sick pay for Self-Employed

For the self employed who find themselves out of work or have to self isolate, it is now simple to make a claim for Universal Credit or Contributory Employment and Support Allowance. https://www.gov.uk/employment-support-allowance

Coronavirus Business Interruption Loan Scheme

For the Business Interruption Loan schemes contact your bank as they will be the lenders that administer the loans. You can find out more information on the British Business Bank website. https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

Government launches coronavirus business support finder tool

The Government have launched a new tool to help businesses quickly and easily identify what support is available to them during the COVID-19 pandemic.

You can find the tool at: https://www.gov.uk/business-coronavirus-support-finder

The Future Fund

HM Treasury have published details of a new scheme called the Future Fund.  This new scheme, which is set to go live in May, is aimed at start-up high growth businesses which rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.  The Government will issue convertible loans of between £125,000 and £5,000,000, which need to be matched by private investment.

The scheme, when launched, will be run in partnership with the British Business Bank.

Full terms of the loans and eligibility can be found at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/880119/Convertible_Loan_Key_Terms_-__Final_Version_.pdf

Self-Employment Income Support Scheme (SEISS) Going Live

HMRC have announced that the scheme will be open on 13 May with the first claims being paid into bank accounts on 25 May or within six working days of making a claim if later.

HMRC have already started to contact individuals that they believe may be entitled to claim.    

It is possible to check your eligibility by using HMRC’s online checker.  You will need your Unique Tax Reference (UTR) Number and National Insurance Number.  Once you have checked your eligibility you will be given a date as to when you should make your claim.

Those who are eligible will be able to claim a taxable grant worth 80% of their average trading profits up to a maximum of £7,500 (equivalent to three months’ profits), paid in a single instalment.

Full details of the scheme can be found here.

Business Asset Disposal relief (Previously known as Entrepreneur’s Relief)

2 min read

Business Asset Disposal Relief, is available for those in business, which may reduce the tax rate on the first £1 million of qualifying lifetime gains to 10%.

This is targeted at working directors and employees who own at least 5% of the ordinary share capital of the company and the owners of unincorporated businesses.

BADR is available to individuals on the disposal after two complete qualifying years of:

  • all or part of a trading business carried on alone or in partnership
  • the assets of a trading business after cessation
  • shares in the individual’s ‘personal’ trading company
  • assets owned by the individual used by the individual’s personal trading company or trading partnership where the disposal is associated with a qualifying disposal of shares or partnership interest.

New 5% rules for company shareholders

To qualify for BADR, the company needs to be an individual’s personal company where the individual must:

  • be a company employee or office holder
  • hold at least 5% of the company’s ordinary share capital and
  • be able to exercise at least 5% of the voting rights.

For disposals on or after 29 October 2018, they must also satisfy one of the following tests:

  • a distribution test – an individual is entitled to at least 5% of the company’s profit available for distribution to equity holders and 5% of the assets available for distribution to equity holders in a winding up; or
  • a proceeds test – an individual is entitled to at least 5% of the proceeds in the event of a disposal of the whole of the ordinary share capital of the company.

Thought should be given to the structure of your company at the outset to ensure that the tax benefits of Business Asset Disposal Relief are not lost.

Investors’ Relief (IR)

If you do not meet the criteria for Business Asset Disposal Relief (BADR) you may still be able to take advantage of the ow 10% rate of tax through IR.

IR is available to external investors (other than certain employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions need to be met:

•        shares must be newly issued and subscribed for by the individual for new consideration

•        be in an unlisted trading company, or an unlisted holding company of a trading group

•        have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016

•        have been held continuously for a period of three years before disposal.

An individual’s qualifying gains for IR are subject to a lifetime cap of £10 million.

Talk to us about your BADR planning

Loucas can help you to build a tax-efficient financial plan that ensures you are making the most of the reliefs and allowances available to you. 

If you would like to discuss any of the issues raised in this guide please call 01622 758257 or contact us.

Selling a business

8 min read

Selling a business is often the culmination of years of work. It can be a difficult, emotional and time-consuming task. It is not something that many managers or owners do more than once. You have to get it right first time. This briefing outlines:

The advice you will need.

  • Grooming the business for sale.
  • The sale process.
  • Negotiation tips.

1. The decision to sell

1.1 Plan ahead.

  • Think about the possible sale of your business several years before you intend to start the sale process. Good planning will help you maximise the value you get.
  • Consider other ways of exiting from the business. You may be unable to find a buyer, so you should look at options such as a management buy-out or passing the business on to a family member.

1.2 Be clear about your reasons for selling.

  • Common reasons include making as much money as possible, protecting your financial future, moving to something new, retirement or ill health.
  • You may feel the business and staff have better prospects under a new owner.

1.3 Write down your specific objectives.

These might include:

  • Sell by a given date.
  • Sell at a target price, or at least at a fixed reserve price.
  • Receive immediate payment in cash of at least a certain amount.
  • Continue (or not) to be involved in the running of the business.
  • Secure the jobs of your employees.
  • Minimise personal tax liabilities — early tax planning and advice is essential.

1.4 Pick the right time.

  • Consider the economic cycle.
  • Sell before your market declines.
  • Consider any forthcoming tax changes.

For those who sell a business out of choice, rather than a necessity, a common mistake is to sell too early. Spend the necessary time building up stability and profitability (see 3).

2. Getting the right advice

Choose advisers who specialise in selling businesses.

2.1 Good advisers can fill many roles

such as:

  • Boosting your credibility and making negotiations go smoothly.
  • Providing a realistic business valuation.
  • Approaching potential buyers without revealing your identity.
  • Widening the list of possible buyers.
  • Allowing you to run the business while they concentrate on selling it.

2.2 Consider using a combination of advisers to cover all aspects of selling.

  • A corporate finance adviser can help groom the business (see 3), identify buyers, and write the Sales Memorandum (see 4).
  • A non-executive director can offer objective advice and support.
  • A corporate lawyer can draft and negotiate the Sale Agreement.
  • A tax accountant (or lawyer) can minimise your tax liabilities.
  • Specialists can accurately value assets.

2.3 Agree a clear fee structure.

There are three main ways of charging fees:

  • An hourly rate. Obtain an estimate of how many hours’ work is required. Agree an upper or a review limit, and the timing of interim fee statements.
  • A fixed rate for a certain piece of work (eg drawing up the Sales Memorandum).
  • A contingency fee dependent upon success and the eventual sale price.

2.4 Divide responsibilities between advisers.

  • The instruction and fee basis for each adviser should be clear and in writing.
  • Avoid overlapping responsibilities, but seek second opinions on important issues.
  • Agree the lines of communication and make sure each party knows its responsibilities for dealing with enquiries. Take care to define who is doing what and coordinate the process.

Get key items of advice confirmed in writing.

3. Grooming the business

Showing the business in the best light is a crucial factor in gaining the best possible price.

3.1 Create a good financial record.

  • Concentrate on short-term results.
  • Try to show a stable financial pattern through the year. Delay or bring forward major purchases to help achieve this.
  • Be realistic when using depreciation figures or the timing of income in your accounts. Provisions for bad debt and old stock should also be realistic.
  • Sell under-used equipment and property.
  • Improve your working capital position by good stock management and tighter credit control.

3.2 Make sure management information systems are working smoothly.

  • Buyers will want information quickly.
  • You need to show that the business is under control.
  • Ensure the information is accurate. A buyer’s confidence will be undermined by errors.

3.3 Present the assets in good condition.

  • Premises and equipment should look well maintained.
  • Stock should be neat and orderly.

3.4 Make the business less risky from the buyer’s point of view.

  • Turn informal deals with suppliers and customers into formal contracts.
  • Establish sensible incentive schemes to encourage key employees to remain with the business.
  • Reduce dependence on a few large customers or a single source of supply.
  • Tie up any loose ends. If your tenancy agreement is due to expire soon, make sure the landlord will agree a new one, preferably in writing.

There are many ways to make a business shine, so it is always worth discussing with your adviser or non-executive directors.

4. Sales Memorandum

The Sales Memorandum is the initial marketing document sent to interested parties. It is written jointly by the management and your corporate adviser. It should:

4.1 Make the business sound attractive.

4.2 Be a source of hard information for buyers.

4.3 Show that the business can be improved.

  • This is particularly important when the buyer plans to be a hands-on manager.

Keep detailed confidential information out of a Sales Memorandum. This can be shown later to serious buyers.

5. Marketing the business

Marketing your business falls into six stages.

5.1 Find potential buyers

such as,

  • Competitors, suppliers or customers.
  • New market entrants, including foreign companies.
  • Your own management (a buyout) or another management team (a buyin).
  • Financial investment companies.

5.2 List possible buyers.

  • This should involve no more than 30 names, divided into an A and a B list.

Only use the B list if the A list does not produce results.

5.3 Approach the possible buyers to see if they are interested.

  • Keep your own business anonymous by using an adviser.
  • It is usual to approach a business through its adviser (eg the auditor), unless you have a better contact. The adviser can direct you to the appropriate person.

If the business is run by an owner-manager, approach the individual directly.

5.4 Ask your legal adviser to draw up a short confidentiality agreement for interested buyers to sign before any discussions commence.

5.5 Send out the Sales Memorandum with:

  • An outline of the sale timetable.
  • Details of where and when you would like to meet buyers.
  • A request for opening offers.

5.6 After receiving offers, draw up a shortlist of buyers.

  • Reject buyers without the finance to make the purchase.

The process of meeting buyers can be disruptive to managing and running your business. Balance the access you give buyers with maintaining confidentiality and productivity.

6. Weighing up the offers

There are many ways of paying for and taking over a business. You will need to weigh up what is on offer. The most important things to consider are:

6.1 Can the buyer really pay for the business?

  • However good an offer may sound, unless it is properly financed, it is worthless.
  • Buyers must have the right approvals (eg from the board or from shareholders).

6.2 What form will payment take?

  • Cash payment up front is the safest option but may also be the least tax efficient.
  • If deferred cash payment is offered, establish whether it is guaranteed. It may be in the form of earn-outs which are linked to future sales or profits.

In a situation where payments are reliant on the future performance of the business, make sure you retain some form of management control to enable performance targets to be met. Otherwise, you may receive less than you are entitled to.

  • A share swap is only comparable to a cash payment if the shares you receive are in a quoted company. Make sure to check the tax implications.

Shares in an unquoted company may be hard to value and difficult to sell.

6.3 What will your responsibilities and liabilities be?

  • You may be asked — or required — to remain involved in the business. But remember you will no longer be in control — consider whether you may find this difficult and frustrating.
  • You will probably be tied to warranties and indemnities for a year or more.

6.4 How will the business be run in future?

  • What expansion or sales plans does the buyer have?
  • Will any parts of the business be sold off?
  • How will the deal affect employees?
  • Will anyone be made redundant?

6.5 How long will completion of the sale take?

  • Industry and accounting due diligence must be completed. This may include an accountant’s report.

The accountant’s remit will be to verify the key management information and to identify potential problems for the buyer.

Legal due diligence may take up more time — sometimes for several months.

7. Choosing a buyer

You should now finalise sale terms.

7.1 Be sure you fully understand everything you are signing for, eg any warranties or indemnities you will have to provide.

7.2 Play off one party against another so that they raise their offers.

  • Be prepared to bluff. The buyers will negotiate, but are unlikely to pull out.

7.3 Choose the buyer you want to sell to.

  • Discuss the deal only with this candidate.
  • Do not try to negotiate better terms at this stage, as this would destroy any trust that is developing between you and the buyer. A good working relationship is important.

Your goal now is to complete the deal without any hiccups.

7.4 Quickly agree Heads of Terms with the buyer.

This is a signed agreement setting out the deal’s chief points.  Parts may be legally binding. For example:

  • An exclusivity period during which the seller cannot negotiate with anyone else.
  • Payment of the buyer’s (or your) costs.

7.5 Tell other potential buyers that you have signed a Heads of Terms with the buyer.

  • Keep at least one other buyer interested, as a back-up.

8. Completing the deal

The buyer’s offer will be subject to further due diligence and to the detailed sale agreement. Provided that this due diligence is trouble free, and neither party has any surprises up its sleeve, the sale should now be relatively safe.

8.1 The further due diligence usually involves the buyer’s accountants and lawyers.

  • The accountants will want to look at every aspect of the finances of the business.
  • The lawyers will want to check that your business has full legal ownership of all key assets (eg property deeds and licensing contracts). They will also want to look at the legal relationships with customers, suppliers and employees.

Many legal issues are covered by warranties and indemnities that you, as a vendor, will almost certainly be asked to sign. Read these carefully — they can be far reaching.

8.2 Certain members of your staff (e.g. Finance Director or Company Secretary) may have to be involved early on in the due diligence process.

  • Be mindful of the feelings of your employees, especially when communicating your plans, as you may lose key members of staff if they fear their jobs are in jeopardy. Under EU rules, businesses with more than 50 employees have to notify and discuss, with their employees, any changes likely to affect their jobs. Penalties for non-compliance can be severe.
  • Carefully consider who you tell and when you tell them.

8.3 Finalise the sale and purchase agreement.

Getting your price

Once you have received opening offers, start the bargaining process.

  1. Set a price.
  • Decide what price you are likely to get.
  • Reject buyers who are significantly below this level.

2. Coax the remaining buyers into closer contact, keeping them well informed.

  • Offer them access to selected members of your team.
  • Distribute positive business data, before the buyers ask for it.
  • Be ready to counter negativity.
  • Be open and transparent.

3. Spur buyers into action. Ask for final offer

  • Tell them how much to raise their offers.
  • Consistently emphasise the future business opportunities.
  • Make it clear that other buyers are also seriously interested in the business.

Setting and holding out for a high price usually pays off. Potential buyers will gain an impression of genuine self-confidence.

Further Information

As a firm, we are able to provide a wide range of services tailored to your particular industry.  We believe by staying up to date with not only current but changing legislation and industry news we are better placed to help our clients and their businesses succeed. 

If you would like to discuss any of the topics in this update or how Loucas can assist you please do not hesitate to contact us.

The information contained in this publication has been prepared for general guidance and is not intended as advice.  Whilst every care is taken to ensure the accuracy of the information, no responsibility can be accepted by Loucas for any loss resulting from acting or refraining from acting as a result of any material in this publication.  The information in this publication is not designed as a substitute for seeking professional advice.

Self Assessment Tips and Advice

4 min read

Self assessment tax returns can be complicated, with many tax payers struggling to complete these correctly. A recent study found that 735,258 tax returns in January 2020 were submitted less than 24 hours before the self-assessment filing deadline at midnight 31st January.

Legislation changes frequently, meaning that taxpayers risk paying too much tax and/or incurring penalties through failing to get things right.

As more information moves online, and tax becomes more digital, taxpayers may increasingly need help in understanding their obligations, ensuring that the information HMRC holds about them is correct and meeting the increased filing obligations.

Do I need to complete a Tax Return?

The Self Assessment deadline of 31st January 2022 for filing a 2021 Tax Return is fast approaching. The 2020 Return covers the period 6 April 2020 to 5th April 2021.

So how do you know if you should complete a Tax Return ?

If any of the following were applicable to you then you may be required to register for Self Assessment and complete a Tax Return:

  • Were self employed or a partner in a partnership business.
  • Were a company director and received non PAYE income from the company.
  • Had income over £100,000.
  • Received more than £10,000 from dividends or investment income.
  • Received rental income.
  • Had foreign income.
  • You or your partner earned over £50,000 and claimed child benefit.
  • Made a capital gain on the sale of an asset.

HM Revenue & Customs have developed a useful online check which will also help you decide whether or not you need to complete a Tax Return.

If you discover you need to file a Tax Return, the first step is to register for Self Assessment.  The easiest way to do this is through HMRC’s website.  Shortly after registering, HMRC will issue you with a tax reference number (UTR).  You will need your UTR to file your Return.

If you miss the Self Assessment deadline then an automatic penalty will be issued, whether or not you actually owe any tax. Our team of knowledgeable Accountants are on hand to help you. Reach out to us on 01622 758257 or email enquires@loucas.org.uk

How to spread the payment of your Self Assessment tax liability

Your Self Assessment liability has to be paid by 31 January following the end of the tax year, with a possible 2nd payment due on 31 July depending on what your liability is.

There are a number of different methods you can use to actually make the payment, details of which can be found on the HM Revenue & Customs’ website.

As any alternative to actually making the payment in a lump sum, you can spread payment of your Self Assessment liability over twelve months through your PAYE tax code as long as all these apply:

  • you owe less than £3,000 on your tax bill
  • you already pay tax through PAYE, for example you’re an employee or you get a company pension
  • you submitted your paper tax return by 31 October or your online tax return online by 30 December

If you find yourself in a position were you are unable to pay your liability, you should contact HMRC’s Business Payment Support Service as soon as possible, ideally before the payment deadline.  You may be able to agree an instalment plan to settle the debt over a period of time and whilst interest may still be payable, you should be able to avoid the penalty charges.

If you do not agree a payment plan and fail to settle your liability in full by the due date interest will be charged and if paid more than 30 days late a 5% surcharge will be issued.

Reducing your payments on account

Payments on account are payments made towards your eventual Income Tax and Class 4 NIC liability.

Each payment is based on half your previous year’s tax bill and are payable by 31 January and 31 July following the end of the tax year.

You have to make the payments on account every year unless:

  • your last Self Assessment tax bill was less than £1,000
  • you’ve already paid at source more than 80% of all the tax you owe

If you believe your tax bill will be lower than in the previous year, you can ask HMRC to reduce your payments on account.

This can be done through your online digital account or by completing form SA303.

It is possible to reduce the payments on account at anytime, even after the first payment has been made.  This will result in any over payments being refunded.

It should be noted that if you reduce down your payments on account lower than they should have actually been this will result in interest being charged.

You can find out more information about our personal tax services here.

Missed Deadline

HM Revenue and Customs (HMRC) must receive your tax return and any money you owe by the deadline midnight 31st January 2022. You’ll usually pay a penalty if you’re late submitting your tax return. You can appeal against a penalty if you have a reasonable excuse.

If you do not pay the tax you owe for the previous tax year on time, the more you delay, the more you will be required to pay. This is why it is imperative that you pay the tax as soon as you can. The information below details the penalties you will have to pay if your tax return is late. If a partnership tax return is late, then each partner will be required to pay the penalties shown below.

Penalties for missing the tax return deadline:

  • 1 day late: A penalty of £100 which will apply even if you have no tax to pay or have already paid the tax you owe.
  • 3 months late: £10 for each following day – up to a 90 day maximum of £900. This is in addition to the fixed penalty above.
  • 6 months late: £300 or 5% of the tax due, whichever is the higher. This is in addition to the penalties above.
  • 12 months late: £300 or 5% of the tax due, whichever is the higher.

How we can help

Loucas aims to ease the stress caused by self assessment and help you avoid costly mistakes, by offering a complete self assessment service.

We can save you time, worry, and money by handling this process for you. We will do all the necessary calculations, complete your return, and offer advice on how you might better manage your tax liabilities.

We do not believe that dealing with tax correspondence should be stressful or confrontational. We work towards having a constructive relationship with HMRC and believe that this works in the best interests of our clients.

Please do contact us at Loucas for help.  Alternatively, you can reach us on 01622 758257.

Can you claim vat back on your staff Christmas party?

By Stuart Shaw

2 min readWith Christmas fast approaching many Company Directors want to thank and reward their staff for their hard work. For limited companies, there are certain tax benefits on staff annual and Christmas parties and giving gifts to employees.

Tax free staff Annual and Christmas parties

For any annual event, be it a summer BBQ or Christmas Party, HMRC provides a tax relief for all employees set at £150 per head. The total claim for any annual events combined requires being below the £150 limit to qualify per employee.

How to calculate the cost per head?

The cost per head for the whole event from start to finish can include;

  • food
  • drink
  • entertainment
  • taxis home
  • overnight accommodation

If the VAT, inclusive of cost of the event is over the £150 limit the whole benefit is taxable as a benefit in kind. To calculate the cost per head of your annual or Christmas party, divide the total cost of the function by the number of employees.

Can you bring a guest?

The events are mainly for entertaining employees. If the company has several branches then the event is open to all staff in their location. The £150 threshold is per employee and is split between any employees’ partners or guests who attend too. The cost of the whole event is an allowable expense for your business.

Can you invite suppliers or customers?

When inviting customers or suppliers to the Christmas party, VAT relief may be restricted as non-employees are also being entertained. Event’s for only directors, partners or sole proprietors,  will not be tax deductible as all employees are required to be invited for it to qualify.

What gifts can you give that are tax allowable?

Employers can give gifts listed below to employees as tax deductible, trivial benefit, as long as it does not exceed £50.

  • Turkey,
  • a bottle of wine
  • a box of chocolates

Unfortunately, a hamper with food and wine will not be classed as a trivial benefit. Christmas presents paid in cash to staff are taxed as earnings with tax and national insurance. This also applies with gift vouchers in excess of £50 which are exchangeable for goods and services too.

Record keeping for your annual and Christmas parties

For all events, keep the receipts. By make a note of the employees who attended keeps records organised too.

From Loucas we hope you enjoy your Christmas festivities and that your employees also enjoy their seasonal gifts.

Have a great time.

For more advice on trivial benefits read more on trivial benefits and what they are?

Do you have a networking strategy?

By Athos Louca

3 min read

Do you have a networking strategy?

It takes time and commitment to build up and maintain an effective network, but in our experience these are resources well spent. As with so many aspects of business life, it pays to approach networking in an organised, strategic manner. Read our guide on tips to networking.

Networking

Before the Networking Event

Researching networking events before you attend to find out who will be there and what industries they are from is key.  This will help you decide if the event is the right one for you. Will attending likely yo introduce you to the types of customers you are looking for?

One tip to stand out from the other networkers is by offering some invaluable information. This could be useful advice, a contact or information the person you are talking to  is interested in. To help you break the ice and start conversations with others it’s a good idea to give some thought to possible conversation starters you could use.

During the event

Introducing yourself and approaching people you don’t necessarily know can be daunting. Aim to make a personal connection though talking about your hobbies or even better about their hobbies and interests. Don’t feel the need to rush into talking about work related topics or trying to sell something and when you do get round to talking about your business refrain from using jargon.

When contacts are talking, listen intently and show interest in what they are saying.  Avoid getting distracted by just thinking about what to say next. This will help the conversation flow better and you to connect with the potential customers or contacts.  Individuals like talking about their businesses so asking thoughtful questions is a great way to make a lasting first impression.

Remember to smile.  Not only does smiling make it easier for people to connect with you because you are more open and welcoming, it also helps them remember you and your company.

If a fellow networker hands you their business card, make a positive statement rather then putting it in your pocket.  By commenting on their business, it will show that you are interested in them, as opposed to just trying to making a sale.

After the event

Having done the hard bit, it is important to maintain a database of all the contacts you have met.  They should be put into different categories such as potential customer, referral contact or professional advisor.  This will also help you prioritise those contacts that perhaps will be the most useful to you in the future.

After the event, take the time to  email the contacts you made and connect with them on LinkedIn.  If you are able to make reference to their business or the service they are providing it will again demonstrate that you were listening. You stand a far better chance of developing the relationship further.  This is also an opportunity for you to more formally introduce your business and explain how you could work together in the future.

Future growth

To maintain successful business relationships you will need to ensure that you keep in regular contact.  Consider arranging further meetings every few months, even if it is just to grab a quick coffee together. The relationships forged from networking can be invaluable to start a collaboration, partnership or take advice from someone who you consider knowledgeable. Networking doesn’t necessarily have to be frequent or time consuming. If you want your business to grow then it is something business owners need to invest time in. If you don’t, the chances are they will simply fall by the wayside.

To help evaluate and improve your networking approach why not take our Network Strategy Test.