The Government and HMRC have updated its collection of high-level guides called “partnership packs”, intended to help businesses involved in importing and exporting prepare for changes to customs procedures after 29 March 2019 in the event of a “no deal” scenario.
If the UK exits the EU without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.
In the event of a “no deal” Brexit the government's aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses.
However, there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU countries.
POSTPONED VAT ACCOUNTING FOR IMPORTS
The government has announced that in the event of a “no deal” Brexit, it will introduce postponed accounting for import VAT on goods brought into the UK.
This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT at or soon after the time that the goods arrive at the UK border. This procedure will apply both to imports from the EU and non-EU countries.
LOW VALUE CONSIGNMENTS
If the UK leaves the EU without an agreement, VAT will be payable on goods entering the UK as parcels sent by overseas businesses. Low Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. For parcels valued up to and including £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK.
VAT MINI ONE STOP SHOP (VAT MOSS) WILL COME TO AN END
A further change if the UK leaves the EU without an agreement is that the UK will stop being part of EU-wide VAT IT systems such as the VAT Mini One Stop Shop which currently simplifies VAT reporting for UK businesses.
Businesses can currently move goods freely between EU countries. For customs purposes, this means that businesses trading with the rest of EU do not have to make any customs import or export declarations, and their trade with the EU is not subject to import duty.
In the event of a “no deal” Brexit there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation and movements of goods between the UK and EU would end.
HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system.
From 11pm on 29 March 2019, for businesses trading with the EU, the impacts would include businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as are currently applied in cases where goods move between the UK and non- EU countries.
This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration).
For imports into the UK, a separate safety and security declaration needs to be made by the carrier of the goods (usually the haulier, airline, freight train operator or shipping line).
For exports from the UK, the export declaration includes the safety and security declaration.
WELCOME CGT ENTREPRENEURS' RELIEF CHANGE FOR SHAREHOLDERS
In the December 2018 newsletter we alerted you to important changes to CGT entrepreneurs’ relief included in the latest Finance Bill that could have the effect of denying the relief to certain employee shareholders. As the result of lobbying by the professional bodies the government have made a late change in the Finance Bill to the definition of “personal company” so that fewer shareholders will be denied the relief when they dispose of their shares.
The normal test is that the shareholder is required to be entitled to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.
The amendment provides an alternative test which would allow relief where the individual is entitled to at least 5% of the sale proceeds in the event of a disposal of the whole of the ordinary share capital of the company, even if the 5% test in relation to distributable profits and assets on a winding up was not satisfied.
This remains a complex area and we would suggest that you contact us to review your company’s share structure to check whether particular shareholders would be entitled to relief for their shares.
CORPORATION TAX RELIEF BACK FOR ACQUIRED GOODWILL
A further late change to the Finance Bill will re-introduce relief for acquired goodwill on the acquisition of businesses with eligible intellectual property from 1 April 2019.
This relief was withdrawn back in July 2015 and the restoration of relief for goodwill and customer-related assets is very welcome although the new form of relief will be more restricted.
The proposed new relief will be given at a fixed rate of 6.5% on up to 6 times the value of any qualifying intellectual property assets in the business being acquired. Qualifying assets will include patents, registered designs, copyright and design rights and plant breeders' rights. This means that the qualifying costs will be written off over just over 15 years and will not follow the treatment in the company accounts as currently applies to other intangibles.
TERMINATION PAYMENT CHANGES DELAYED TO 2020
HMRC have announced that the changes to the national insurance (NIC) treatment of termination payments and sporting testimonials have been delayed to 6 April 2020.
From 6 April 2020 Employer class 1A NIC will become payable on termination payments in excess of £30,000 and on sporting testimonials that exceed £100,000 (lifetime limit). The changes are intended to align the NIC treatment with the treatment for income tax although there is no NIC liability for the employee on such payments.
Whether or not the £30,000 exemption applies on termination of employment is a complex area and specialist advice should be obtained.
DON'T BE LATE IN PAYING YOUR PERSONAL TAX BILL
Individual’s 2017/18 income tax, CGT, class 2 and 4 NIC liabilities should have been paid by 31 January 2019.
Note that if the balance is still unpaid at the end of February 2019 a 5% surcharge penalty is added in addition to the normal interest charge unless a time to pay arrangement has been agreed with HMRC.
DIARY OF MAIN TAX EVENTS
FEBRUARY / MARCH 2019
Corporation tax payment for year to 30/04/2018 (unless quarterly instalments apply)
PAYE & NIC deductions, and CIS return and tax, for month to 05/02/2019 (due 22/02/2019 if you pay electronically)
Corporation tax payment for year to 31/05/2018 (unless quarterly instalments apply)
5% penalty imposed on 2017/18 income tax, CGT, class 2 and 4 NIC still unpaid at this date
PAYE & NIC deductions, and CIS return and tax, for month to 05/03/2019 (due 22/03/2019 if you pay electronically)
Keep informed on upcoming Employment Law Changes which will take effect from April 2019.
Statutory Payments and Hourly Rate increases:
Other important changes from April 2019 are:
If an employee works varying hours each week, those hours must now be shown on their payslip together with the hourly rate they are to be paid at.
The minimum pension contribution rates are increasing to 3% for employers and 5% for employees.
For more information please contact Alison or Donna on 01254 300 050.
Click here to meet our payroll team and see how you could benefit from Mayes running your payroll.
Happy New Year and welcome to our first monthly newswire of 2019.
At this time of year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5 April.
An obvious tax planning point would be to maximise your ISA allowances for the 2018/19 tax year (currently £20,000 each). You might also want to consider increasing your pension savings before 5 April 2019 as the unused annual pension allowance is lost after three years.
For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will.
For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers contributions by both the individual and their employer.
Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there are rumours that this generous relief may be reduced in future.
INCREASED CAPITAL ALLOWANCES START 1 JANUARY 2019
The Chancellor announced a temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery to £1 million from 1 January 2019. However transitional rules mean that the full amount will not necessarily apply to your business straight away.
For example, if your business year end is 30 June 2019 the maximum AIA would be £600,000 being 6/12 x the old £200,000 limit plus 6/12 x the new £1 million limit. The following year to 30 June 2020 would be entitled to the full £1 million.
NEW CAPITAL ALLOWANCE FOR COMMERCIAL BUILDINGS
The Autumn 2018 Budget announced a new 2% straight line tax deduction for the cost of construction or renovation of commercial buildings and structures. HMRC have now issued a technical note setting out the details for the operation of the new relief.
Unlike the old Industrial Buildings Allowance the new relief is available for the construction of shops and offices as well as factories and warehouses.
The new tax break is available where the contract is entered into and construction costs are incurred on or after 29 October 2019. The allowance is available to commercial property landlords as well as trading businesses. There are special rules for leasehold buildings which determine whether the landlord or tenant is entitled to the allowance.
Note that there are more generous plant and machinery allowances available for fixtures and fittings within the building and we can work with you to help you maximise tax relief. The AIA referred above would mean that there may be 100% capital allowances for equipment such as central heating and air conditioning.
CAPITAL ALLOWANCE ON HIGH CO2 CARS AND ASSETS IN SPECIAL RATE POOL REDUCES TO 6%
One of the other capital allowance changes announced in the Autumn Budget was the reduction of the writing down allowance on assets in the special rate pool from 8% to just 6% per annum reducing balance from April 2019.
The assets included in this pool include long life assets, such as aircraft, integral features within buildings and cars emitting more than 110g CO2 per kilometre.
A claim for the 100% AIA referred to above can be made for expenditure on these assets, (with the exception of motor cars) and this will result in faster tax relief.
This means that where a company buys a motor car that emits more than 110g CO2 per km it will take many years to get relief for the expenditure as even when the car is sold the proceeds are deducted from the special rate pool and continue to be written down at 6% reducing balance.
For example Global Ltd which makes up accounts to 31 March each year buys a new Mercedes E220d AMG line for the managing director Mr Global for £40,000. As the CO2 emissions are 127g per km the WDA would be 8% for year ended 31 March 2019 = £3,200 leaving a tax written down value of £36,800. The 6% WDA would then apply for year ended 31 March 2020 = £2,208 leaving £34,592. If the car was sold for £25,000 in the following year then the remaining balance of £9,592 would continue to be written down at 6% per annum, hence a very long write off period.
It may be more tax efficient to lease such a vehicle as, although 15% of the lease rentals are disallowed for tax purposes for such high CO2 vehicles, this may nevertheless be more beneficial.
Note that the above rules operate differently where the motor car is acquired by a sole trader or a partner for his business as the car is not included in the pool and a balancing adjustment occurs when the car is sold.
ADVISORY FUEL RATE FOR COMPANY CARS
These are the suggested reimbursement rates for employees' private mileage using their company car from 1 December 2018. Where there has been a change the previous rate is shown in brackets.
Note that for hybrid cars you must use the petrol or diesel rate.
You can continue to use the previous rates for up to 1 month from the date the new rates apply.
PASSING ON THE FAMILY HOME
New inheritance tax rules for passing on the family home started on 6 April 2017. This additional relief should be taken into consideration when drafting your Will and we can work with your solicitor to make sure your Will is tax efficient.
From 6 April 2017 an additional nil rate band of up to £175,000 is available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band.
This additional relief is however restricted if your assets exceed £2 million. The rules are fairly complicated but we can review your personal circumstances to ensure that you take advantage of all the relief that you are entitled to.
This additional inheritance tax relief is available even when you downsize to a smaller property.
For example if a married couple currently live in a large house worth £500,000 and downsize to a flat worth £250,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell up completely and move into a rental property and still get the inheritance tax relief!
DIARY OF MAIN TAX EVENTS
JANUARY / FEBRUARY 2019
Corporation tax payment for year to 31/3/18 (unless quarterly instalments apply)
PAYE & NIC deductions, and CIS return and tax, for month to 5/01/19 (due 22/01 if you pay electronically)
Deadline for Self-Assessment tax return for 2017/18 if filed online. Also the due date for 2017/18 balancing payment and 50% payment on account of 2018/19 tax.
Corporation tax payment for year to 30/4/18 (unless quarterly instalments apply)
PAYE & NIC deductions, and CIS return and tax, for month to 5/02/19 (due 22/02 if you pay electronically)
Welcome to our monthly newswire. Please contact us if you wish to discuss any matters in this newsletter further.
Those thinking about making gifts at Christmas should take advantage of the various inheritance tax (IHT) exemptions and reliefs available to them. Note that certain gifts can also have capital gains tax (CGT) implications.
THE IHT ANNUAL EXEMPTION - USE IT OR LOSE IT!
Although not particularly generous at £3,000 per donor per annum if this annual IHT exemption is not used by 5 April it is lost, although it is possible to carry the allowance forward one year if unused. This means that if the annual allowance for 2017/18 was not used an individual may make gifts of up to £6,000 in 2018/19.
Where the gifts to individuals exceed the annual exemption there may still be no inheritance tax to pay if they survive for 7 years following the gift or the gift falls within the £325,000 nil rate band.
GIFTS OUT OF INCOME ARE NOT TAKEN INTO ACCOUNT FOR IHT
A more generous inheritance tax exemption applies where the donor can prove that he or she is not transferring capital but is making gifts out of their income. There are detailed conditions for this exemption to apply requiring records to be kept of income and expenditure in order to prove that there is sufficient surplus income each year to make regular gifts to the beneficiaries. We can of course assist you in keeping the necessary records to satisfy HMRC.
CERTAIN GIFTS CAN HAVE CAPITAL GAINS TAX CONSEQUENCES
Although there will be no CGT on gifts of cash there may be CGT to pay where the gift comprises shares or other assets. This is because the transaction will generally be deemed to take place at market value between connected persons even though no money changes hands.
The amount of the gain would normally be determined by comparing the market value with the original cost of the asset gifted. Where the amount of this gain is within the annual CGT allowance (currently £11,700) then there would be no CGT payable.
Where the gift comprises shares in a trading company or other business assets it may be possible for donor and recipient to sign an election to hold over the gain so that no CGT is payable by the donor at the time of the gift. The effect of such an election is that the recipient of the asset will take over the donor’s original cost for subsequent disposal. Please get in touch with us if you are considering making gifts of shares or other assets so that we can advise you fully of all the tax implications.
NOT ALL SHARES QUALIFY FOR CGT ENTREPRENEURS’ RELIEF NOW
As the result of changes announced in the Autumn Budget, and now incorporated into the latest Finance Bill, not all ordinary shares necessarily qualify for the 10% CGT entrepreneurs’ relief rate on disposal.
As mentioned in last month’s Budget newsletter the definition of a personal company was tightened up so that from 29 October the shareholder must have entitlement to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company. The shareholder, as before, will also need to be an officer or employee of the company.
This change means that certain “alphabet” and other shares with limited rights may no longer qualify for CGT entrepreneurs’ relief when disposed of. As a consequence of this change we may need to review the rights attaching to the shares that your company has issued and make changes to ensure that the shares qualify.
GIFTS OF UP TO £50 TO EMPLOYEES
From April 2016 new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind tax free.
The new rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.
Conditions for the exemption to apply:
So this exemption will generally apply to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.
Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company the exemption is capped at a total cost of £300 in the tax year.
Please feel free to contact us if you are considering taking advantage of this exemption.
GIFTS TO CHARITY
Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.
For example where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing their net cost to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell your donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
COLLECTING UNPAID TAX FOR 2017/78 THROUGH YOUR PAYE CODING
Under certain circumstances it is possible to arrange the collection of unpaid tax through your PAYE coding rather than making a balancing payment on 31 January. This will depend upon the amount outstanding and the amount of income taxable under PAYE.
There is a further condition that the return is submitted to HMRC online before 30 December 2018 in order that the 2017/18 tax be collected by amending the 2019/20 PAYE coding. So please get your tax return information to us as soon as possible if you would like to take advantage of this facility.
DIARY OF MAIN TAX EVENTS
DECEMBER 2018/JANUARY 2019
PAYE & NIC deductions, and CIS return and tax, for month to 05/12/18 (due 22/12 if you pay electronically)
Deadline for filing 2017/18 tax return online in order to request that HMRC collect outstanding tax via the 2019/20 PAYE code
Corporation tax for year to 31/03/2018 unless quarterly instalments apply
PAYE & NIC deductions, and CIS return and tax, for month to 05/01/19 (due 22/12 if you pay electronically)
Deadline for filing 2017/18 self-assessment tax return online and paying your outstanding tax for 2017/18.
Do you want to join a forward thinking leading accountancy practice as one of their team - we have a position available for part qualified ACCA or newly qualified within our accounts team.
Main responsibilities will include preparation of accounts and management accounts. Other responsibilities will include bookkeeping, vat returns, tax and audit.
Audit experience preferable but not essential as training will be provided.
Regular client contact will be involved and some work will be client based so a full driving licence and own car are required.
Team management, organisational and communication skills are essential in the role.
If you are interested in becoming a part of a great team please contact Anne Parkinson - email@example.com - 01254 300050
Welcome to our monthly newswire. In this edition we focus on the Chancellor’s Autumn Budget announcements. Please contact us if you wish to discuss any matters in this newsletter.
MORE MONEY FOR NHS AND AN END TO AUSTERITY?
As previously announced, these were the main themes of the Chancellor Phillip Hammond’s third budget but what we were waiting to hear was where the extra money was going to come from? Had he found a “Magic Money Tree”, or would tax and borrowing have to increase?
We now know that the extra money will come from better than expected economic growth and consequential increased tax revenues. But there may have to be a Spring 2019 Budget if Brexit negotiations don’t go to plan….
PERSONAL ALLOWANCE AND HIGHER RATE LIMIT INCREASED EARLY
The Government’s manifesto pledge back in 2015 was that the personal allowance would rise to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, the Chancellor has decided to bring forward these increases one year early from 2019/20, taking an estimated 1 million taxpayers out of higher rate tax.
Note that up to 10% of the personal allowance (£1,250 from 6 April 2019) may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer. As announced last year, this transfer is now available on behalf of deceased spouses and civil partners.
NO CHANGES IN TAX RATES
The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.
There had been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. Note that only the first £2,000 of dividend income is now tax free.
The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2019/20. Dividends on shares held within an ISA continue to be tax free.
The much rumoured further restriction in pension tax relief failed to materialise.
IR35 “OFF-PAYROLL” RULES TO BE EXTENDED TO PRIVATE SECTOR
Very controversially, the Government have decided to extend the rules for personal service companies in the public sector to workers in the private sector from April 2020.
This follows a consultation in Summer 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation which has applied in the public sector since April 2017 seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company. There will be further consultation on the detailed operation of the rules, and small businesses (yet to be defined) engaging such workers will be excluded.
This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to such workers and deduct tax and NICs.
CAPITAL GAINS ENTREPRENEURS’ RELIEF CHANGES
The Chancellor has announced that the minimum qualifying period for CGT entrepreneurs’ relief will be increased from 12 months to 24 months for disposals on or after 6 April 2019.
There are further changes affecting shareholdings in personal companies. In addition to the individual holding 5% or more of the ordinary share capital and voting control they will also now be required to be entitled to 5% or more of the company’s distributable profits and assets in a winding up. As now the individual must also be an officer or employee of the company concerned; and the company must be a trading company or the holding company of a trading group.
COMPANY TAX TO REDUCE TO 17%
As previously announced the current 19% rate is scheduled to reduce to 17% from 1 April 2020.
ANNUAL INVESTMENT ALLOWANCE INCREASED TO £1 m
The Annual Investment Allowance (AIA) which provides businesses with a 100% write off against profits when they acquire plant and machinery has been temporarily increased from £200,000 to £1 million for two years from 1 January 2019. This will again mean that the timing of expenditure will be critical. It may be advantageous to delay expenditure until after 1 January 2019 to get full benefit in certain circumstances.
However, the current enhanced capital allowance for energy efficient plant will be abolished from April 2020. A further change is that the writing down allowance for special rate pool equipment, broadly long-life assets and fixtures in buildings, is being reduced from 8% to 6% from April 2019.
NEW CAPITAL ALLOWANCE FOR COMMERCIAL BUILDINGS
A new 2% straight line tax deduction is being introduced for the cost of construction or renovation of commercial buildings and structures.
This tax break will apply to eligible construction costs incurred on or after budget day and will be available to commercial property landlords as well as trading businesses. The cost of the land is specifically excluded.
R&D TAX CREDIT RESTRICTED
The amount of repayable R&D tax credit for Small and Medium Sized Enterprises (SMEs) will again be restricted by the amount of the claimant company’s PAYE and NIC liability from April 2020.
The new limit will be set at three times the company’s total PAYE and National Insurance contribution (NICs) payment for the period.
VAT REGISTRATION LIMIT CONTINUES TO BE FROZEN
The VAT registration limit normally increases in line with inflation each year. However, It was announced last year that the limit would be frozen at £85,000 until 1 April 2020. It has now been announced that the limit will now remain at the same level until 2022. The deregistration limit will remain at £83,000.
MORE RATES RELIEF FOR SMALL BUSINESSES
There has been much lobbying from the small business sector to reduce business rates to enable traditional retailers in particular to compete with internet traders.
The Chancellor has announced a one third reduction in business rates for small businesses with premises with a rateable value up to £51,000.
DIARY OF MAIN TAX EVENTS - NOVEMBER/ DECEMBER 2018
Corporation tax for year to 31/03/2018 unless quarterly instalments apply
PAYE & NIC deductions, and CIS return and tax, for month to 5/11/18 (due 22/11 if you pay electronically)
Corporation tax for year to 30/04/2018 unless quarterly instalments apply
PAYE & NIC deductions, and CIS return and tax, for month to 5/12/18 (due 22/12 if you pay electronically)
Deadline for filing 2017/18 tax return online in order to request that HMRC collect outstanding tax via the 2018/19 PAYE code
If you've been following our blog series over the last few weeks you will have seen that we've explored Making Tax Digital (MTD), "Cloud" accounting and how the 2 interact.
What I wanted to look at in this blog is how using a cloud accounting package can help you to run your business more efficiently, whether or not you fall under the initial MTD legislation (because ultimately all businesses will eventually fall within it).
Why the need for cloud accounting?
Since the turn of the century or, even more so, the last decade the technologies around us have evolved and we are now more data rich than at any other time in human history. In turn this has meant that the community in which businesses operate has inevitably had to change and adapt and unless those businesses change with it then they risk falling into obscurity or worst still failing because they haven't adapted.
What are the benefits of cloud accounting?
As the world has become so much more fast paced so to has the need to get things done quickly. These days there are a myriad of things that demand your attention at any one time, be that dealing with customers, suppliers or spending time with the family. Everything is demanding more and more of our time and as an entrepreneur the very last thing you got into business for (unless you are an accountant) was to deal with your accounts, and that's why it always gets left until last.
This is where cloud accounting can help.
Cloud accounting can help you to efficiently capture data, quickly categorise data and see just how the business is performing at the click of a button.
This will save you both time and money through increased efficiency.
Let's look at the ways that cloud accounting helps:
Why should you implement cloud accounting?
For those out there that will fall into MTD (VAT registered over the VAT threshold) then there is a need to make the move and to make it quickly, there is only 6 months until the legislation comes in and you can be subject to penalties from HMRC if you don't file your returns using their recommended software solutions.
For the rest of you, there is real benefit in joining the cloud accounting revolution, access to real time information, less data entry and better collaboration amongst your team are all things that will make your business run more efficiently.
Either way you can look forward to an increased knowledge of your business and more time to do what you love.
For more information on how we can help you with the move to the cloud give us a call on 01254 300 050 to speak to a member of our team.
Over the last 2 blogs we have looked at " What is Making Tax Digital" and also "What is Cloud Accounting".
Now let's look at the interaction of both, is MTD's introduction really a good thing for your business?And how should we be embracing the change?
How will MTD benefit me?
HMRC's MTD compatible solutions are mainly cloud based accounting solutions, such as Xero and QuickBooks Online, which are capable of importing bank feeds and linking to 3rd party software capable of capturing your expense receipts without you needing to input them, this will make your bookkeeping process much more efficient if used correctly.
Secondary to the efficiency gains mentioned above is the ability for us, as your accountants, to access your data, in real time, at the same time as you without the need to send backups between each other.
This will lead to a smoother process when we both need to access the information at the same time, such as with Year End Accounts.
Ordinarily when using standard, desktop based, software the process for accountants to prepare anything on your behalf was either:
1. We come to your offices and "take over" your system to prepare the information that we need, or
2. You send us a backup which we then install on our system, make the changes that we need and then send the data back to you.
In some instances this can lead to your system being unavailable to use whilst we work on it, data being upgraded to an incompatible version or, worse still, data becoming corrupted and unable to be restored.
All of these can be time consuming and costly to, you, the business owner.
Any other benefits?
As well as those identified above, the actual filing of the returns to HMRC will be easier, from the current system of having to manually calculate the figures, log in to HMRC's portal, find the correct VAT period and re-key the details in to the boxes.
Using MTD compatible software should make this process as simple as pressing a single button in the software which will automatically send all the required information to HMRC, in the format that they require, without any need for further human interaction.
This is another efficient saving and will also eliminate the risk of errors from mistyped numbers, which could potentially open you up to penalty charges being imposed by HMRC.
MTD should be embraced by business owners as we move towards the future of tax reporting with HMRC. Rather than being more onerous, your entire bookkeeping process can become more streamlined and easier.
Get in touch on 01254 300 050 to see how our cloud accounting experts can help you with the transition to cloud accounting and identify efficiency gains that can help you.
Of the, currently, nearly 50 providers identified by HMRC of Making Tax Digital (MTD) software most offer "cloud" accounting packages.
Moving to "cloud" accounting can help you run your business more effectively, and efficiently, but first let's explore what "cloud" accounting is.
So what is Cloud Accounting?
In today's day and age we all use the cloud on a daily basis, from storage solutions such as iCloud and Google Drive to streaming services such as Netflix, the cloud is all around us and there is no getting away from it. We use it for the majority of things we do every day.
Cloud accounting is nothing new, in fact it's been around for a few years now. First and foremost it is a bookkeeping software just like you have always been used to as a business owner however it now utilises the cloud to save your data and allow you access from anywhere in the world.
Desktop solutions which have been the norm for so long are quickly being overtaken by the cloud accounting solutions as progressive, forward thinking, businesses have been quick to embrace this method of working.
Companies such as Xero and QuickBooks Online offer solutions that enable you to give access, restricted to the areas that they need, to both your team and your accountant. This enables real time collaboration across multiple members from anywhere in the world.
Usually accessed by a web browser cloud accounting packages can be accessed on different operating systems (MacOS or Windows etc.) across a multitude of devices (Mac, PC, tablet and smartphone) bringing a greater flexibility across how you are able to access your data.
And because everything is stored in the cloud there is no need to create backups of your data and send it to your accountant to do their work, and there is also no need to stop working on the data as has sometimes been the case too. Everyone can keep working, and doing what they need to do, with the system all the time.
How does cloud accounting affect me?
If you fall under the MTD legislation (initially VAT registered businesses above the VAT threshold) then from 1 April you will need to move to one of HMRC's recommended solutions or risk penalties being imposed from HMRC.
The next 6 months, before the introduction of MTD, would be a great time to assess the software and implement the preferred solution in your business. Which would also give you time to receive training, and get familiar with, the cloud solution that you have chosen.
Give us a call on 01254 300 050 for more information.
It is just over 6 months until HMRC shake up the tax reporting landscape with the introduction of the Making Tax Digital (MTD) legislation.
From 1 April 2019, and initially aimed at VAT registered businesses, MTD will require that businesses registered for VAT, maintain and file their VAT returns digitally using one of HMRC's approved solutions.
What does this mean?
HMRC have identified a list of software which is MTD compliant and all VAT returns, with a return period beginning after 1 April 2019, will need to be filed using 1 of these pieces of software.
Anybody that should fall within MTD but fails to do so will leave themselves open to penalties from HMRC.
As yet, there is no recommended HMRC solution for filing returns via spreadsheet.
I'm still keeping paper books and records, what are my options?
Don't worry if you are still keeping paper books and resources, there are still options available to you, although they will involve moving to one of HMRC's solutions.
There are ways to do this that may include continuing to maintain your books and records on paper and paying an accountant to convert these on to one of HMRC's solutions before filing.
We would not recommend this though as it will be costly and time consuming to you.
Our recommendation would be that you speak to a member of our team here, identify which solution would be best for you from HMRC's list and then implement it in to your business well in time for your required date for MTD purposes.
We can even offer guidance and training in our recommended solutions.
If you'd like to explore how we could help you with the switch to MTD then please give us a call on 01254 300 050 to speak to a member of our team.
22-28 Willow Street, Accrington, Lancashire, BB5 1LP
T 01254 300050
F 01254 396620
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