BUSINESS RATES REVIEW

Business rates were first introduced in 1990 and their main aim is to help raise revenue to pay for local services. They are paid by occupiers of non-domestic properties including shops, offices, warehouses, factories and guest homes. In the financial year of 2013-2014 £20.5 billion was brought in from business rates.

The announcement follows widespread criticism of the current system, where rates are charged to retailers based on the value of their shop or other commercial property. The arrangement means that companies with similar turnovers can pay dramatically different amounts for business rates due to their properties varying ‘rateable values’ depending on the size and location of their premises.

Chief Secretary to the Treasury Danny Alexander said: “The government has taken measures to help businesses by capping rates and introducing reliefs for smaller businesses. But now the time has come for a radical review of this important tax. We want to ensure the business rates system is fair, efficient and effective.”

The announced business rates review follows the government’s commitment in December 2014 to conduct this review and implement a £1 billion package to reduce the cost f business rates in 2015-16.

From the 1^st of April the government is:

• Increasing help for the high street by increasing the business rates discount for small retail premises. This is expected to benefit around 300,000 shops, pubs, cafes and restaurants.
• Doubling the small business rates relief for a further year to 31 of March 2016 to provide support for 575,000 of the smallest businesses. Ensuring 385,000 small business will pay no rates at all.
• Capping the rise in the business rates multiplier at 2% to benefit all businesses.

The findings of the review are expected to be announced in the 2016 budget

Annual Investment allowance can be claimed, up to a total of £500,000 on Plant and Machinery. This applies to sole traders, partnerships and limited companies until the 31^st of December 2015, as the rates will change in January.

You can claim Annual Investment allowance on Plant and Machinery including:

• Items that you keep to use in your business
• The cost of demolishing plant and machinery
• Parts of a building considered as integral features, for example: lifts, escalators, moving walkways, heating systems, electrical systems and external solar shading.
• Some fixtures such as fitted kitchens, bathroom suites, fire alarm and CCTV systems

You can claim if you rent or own the building, however only the person who bought the item can claim.  You can deduct the full value of an item that qualifies for Annual investment Allowance from your profits before tax. If you sell an item after claiming annual investment allowance you may need to pay tax.

Items you use outside your business

You can’t claim the full value of items you also use outside of your business if you’re a sole trader or partnership. You must reduce the capital allowance you claim by the amount you use the asset outside of your business. For example you buy a laptop for £500. You use it outside of your business for half of the time, therefore you would reduce the capital allowance by 50%.

Writing down Allowances

If you have spent more than £500,000 or want to lower your annual investment allowance if you have lower profits you can write down allowances. The main pool is 18%. The special rate pool of 8% can be used for parts of a building considered as integral, items with a long life, thermal insulation of buildings, cars with CO2 emissions more than 130g/km.

Working out Annual Investment Allowance

Begin with the closing balance of your main pool from the last accounting period. Add an items that you have bought or been given which qualifies for this pool- only include VAT if you are VAT registered. Takeaway anything sold or disposed of that originally qualified for annual investment allowance. Work out how much you can claim using the correct rate. Deduct the amount you can claim from the pool to get the closing balance. Also known as the tax written down value.

When to claim

You can only claim Annual investment allowance in the period you bought the item. The date you bought it is either when you signed the contract, if payment is due within less than 4 months  or when payment is due if it is due more than 4 months later.

If you buy something under a hire purchase contract you can claim for the payments you haven’t made yet when you start using the item. However you can’t claim on the interest payments.

How to claim

• Once you have calculated your capital allowance claim you can include this in either your
• Self-assessment tax return
• Partnership tax return
• Company tax return- you must include a separate capital allowances calculation

Employees can claim up to £2500 and can claim on their self-assessment tax return. If they aren’t required to fill in a tax return employees can fill in form P87.

You can find out more about Annual Investment Allowance at: https://www.gov.uk/capital-allowances/annual-investment-allowance.  If you need any help or advice please call us on 0113 2871430.

The government has named 70 companies that have failed to pay workers the minimum wage. The worst offender being the care provider ‘East Midlands Crossroads’ which owed £37,500 to 184 workers. An estimated 100 cases in the care sector are being investigated. Since the new regime came into place in 2013, some 160 firms have been named. All firms named face financial penalties as well as suffering damage to their reputation.

Legislation is being planned so that the fines can be applied to each underpaid worker rather than per employer. Business Minister Jo Swinson stated “We are helping workers recover the hundreds of thousands of pounds in pay owed to them as well as raising awareness to make sure workers are paid fairly in the first place.”

The news of businesses underpaying their workers comes a day after the low pay commission recommend a 3% rise in the adult minimum wage from £6.50 an hour to £6.70 an hour. This would increase the rate for 8-20 year olds from £5.13 an hour to £5.30 an hour, 16 to 17 year olds would see an increase from £3.79 an hour to £3.87 an hour. Apprentices would also see an increase from £2.73 an hour to £2.80. A decision to increase the minimum wage to these rates will be made in the coming weeks and the rates would come into place from October.

If you would like to discuss your payroll matters do not hesitate to contact us on 0113 2864486

The government have launched the registration for a new marriage allowance, a tax break for married couples which could potentially save them up to £212 a year.

The allowance means a spouse or civil partner who doesn’t pay tax (they are either not earning at all or are earning below the basic threshold of £10600) can transfer up to £1060 of their personal tax free allowance to spouse or civil partner as long as the recipient of the transfer doesn’t pay more than the basic rate of income tax.

This policy recognises marriage and civil partnerships in the income tax system. Taking the tax liabilities of a couple together, it can provide a financial benefit where one spouse or civil partner has an income less than their personal allowance

Prime Minister David Cameron stated that ‘We can afford to do it because of the growing strength of the British Economy, and as a result it means families up and down the country can get a little bit of extra support and more financial security.’

From the 6^th of April up to 4million married couples and 15000 civil partners will be eligible. You can register here: https://www.gov.uk/marriage-allowance

One person in a couple will apply online to transfer the allowance to their spouse or civil partner, and HMRC will tell the recipient about the change in their Pay As You Earn tax code. To be eligible for this tax break you must meet the following criteria:

• you’re married or in a civil partnership
• you have an annual income of less than £10,600 – including pensions, savings and investments
• your spouse or civil partner has an annual income of between £10,601 and £42,385
• you were both born on or after 6 April 1935

If you want to find out more ways to save on tax, please contact us on 0113 2864486 or book a free consultation.

A new policy has been introduced for eligible employees to participate in shared parental leave. This is available when the expected week of childbirth begins, or the child will be placed for adoption on or after the 5^th of April 2015.

SPL is optional and eligible employees can opt into the regime and share the balance of the untaken maternity leave and pay with the other parent for a maximum of 50 weeks, and 37 weeks of shared parental pay. If this is not selected the mother or adopter will continue to be entitled to 52 weeks of maternity leave and 39 weeks statutory maternity pay, maternity allowance where eligible.

An employee is entitled to participate in Shared Parental Leave in relation to the birth or adoption of a child; if they are the child’s mother or adopter and share the main responsibility of care for the child, if they are the mothers or adopters partner or are the child’s father and they share the main responsibility of care for the child.

For the purposes of SPL a partner is the mother’s or the adopter’s spouse, civil partner or someone who lives with them and the child in an ‘enduring family relationship’ but who is not a child, parent, grandchild, grandparent, sibling, aunt, uncle, niece or nephew.

Eligible Employees for SPL or Statutory Shared Parental Pay must comply with the following:

• They have worked continuously for you for 26 weeks at the 15^th week before the expected week of childbirth or the week of adoption.
• They remain in continuous employment until the week before the SPL period.
• If they are the mother or adopter they are entitled to maternity or adoption leave in respect of the child and have ended their entitlement to such leave early.
• If they are the father or partner, and the mother or adopter has ended their maternity leave and or maternity pay early.
• The other parent has worked in an employed or self-employed capacity for at least 26 weeks of the 66 weeks immediately preceding the expected week of childbirth or adoption week, and had average weekly earnings of £30 per week for any 13 of those weeks.
• They have both given a notice of entitlement and a period of leave notice to you and complied with any statutory evidence requirements that you have decided to impose.

If you have employees that may wish to use the new policy, and you need further advice please call our payroll specialists on 0113 2864486.

If you are a sole trader or a business partner you are required to keep records of your business expenditure, income, liabilities and assets. You must also keep a record of all personal income.

There are two ways to record this:

• Traditional Accounting – This is when you record income and expenses by the date you invoiced your customer or received a bill from a supplier. For example if you invoiced a customer on the 28^th of March 2014 and didn’t receive the amount until the following tax year, you would still record this in the 2013-14 tax year.
• Cash Basis Accounting – Businesses with an income of £81,000 or less can use this method to record their accounts. You only record income and expenditure when you have either received the money or paid an outstanding bill. This means that you will not pay income tax on money you haven’t received within the accounting period.

The types of records you are required to keep are:

• All sales and income
• All business expenditure – details of which are on this page https://www.gov.uk/self-employed-records/business-expenses
• VAT records if you are VAT registered
• PAYE records if you are an employer
• Personal income records

Additionally, if you choose the traditional accounting method you are required to keep a record of the following items at the end of the accounting period:

• All outstanding amounts owed to the business
• All outstanding amounts owed out of the business, e.g. to suppliers
• Value of all stock and Work In Progress
• Year-end bank balances
• How much money you have invested into the business
• How much money you have withdrawn for personal use

Types of records include: receipts, bank statements, cheque stubs, sales invoices, till rolls and bank slips.

There has been a dramatic increase in the fines imposed on employers for failing to meet deadlines for enrolling staff into pension schemes. The Pensions Regulator imposed a fixed penalty of £400 each on 166 employers in the last three months of 2014. Previously to this, only three such fines had been issued.

The fines were issued because firms hadn’t submitted their declaration of compliance. This formal document needs to be submitted to the Pensions Regulator within 5 months of the firms start date for the auto enrolment process.

The increase in fines coincided with an increase in the number of medium sized firms obliged to complete Auto Enrolment last year. Medium sized businesses are those with 62-149 members of staff.

Auto enrolment, which was launched by the government three years ago, is aimed to ensure 10 million employees who are not currently in a company pension scheme wither join one or join NEST (National Employment Savings Trust).

The regulator expects 32000 firms will begin the process this year with 770000 small and micro employers will be obliged to join in the period 2015-17.

The regulator recommends that firms start planning at least a year before their staging date for auto enrolment.

The pension minister Steve Webb stated that ‘Companies need to know that they can’t ignore auto enrolment or the letters they receive from the pension’s regulator.

Following the deadline on the 31^st of January 890,000 people face fines for failing to submit their self-assessment tax return on time. There is an initial £100 penalty for failing to submit a tax return by this time, subsequent fines are as follows:

• After 3 months, daily penalties of £10 per day up to a maximum of £900
• After 6 months, a further penalty of 5% of the tax due or £300 whichever is greater.
• After 12 months, another 5% or £300 whichever is greater.

Ruth Owen, HMRC’s director general of personal tax advised ‘if you’re one of the minority who missed the deadline you still need to get your tax return to us as soon as possible, to avoid further penalties and interest mounting up’.

Despite many missing the deadline, HMRC oversaw the biggest digital Self assessment event ever, receiving 10.24 million tax returns by midnight on the 31^st of January. A record 85.5% of these were sent online. Around 4.3 million customers left it until January to file their tax returns, which were issued in April 2014.

Are you one of the 890,000 people who did not file their return on time?  If you need our help to avoid further penalties, please do do avoid contacting us.  It will not go away if you ignore it.

Small UK businesses are about to receive a letter from the Pensions Regulator…It Could Be You!

We know that as a small/medium sized business owner that you wear a lot of hats and your time is very precious. That can often mean you spend more and more time concentrating on core activities, and less on things like compliance. The danger, however, is if you don’t keep up to date with current legislation your business could be vulnerable.

Over 1.3 million small and micro employers are due to stage over the next two years … are you one of them? In the next few months these SME’s will receive letters telling them about their new duties to automatically enrol staff into a workplace pension.

As an employer there are a number of duties that you must comply with as part of the automatic enrolment scheme. Here is an outline of some of the duties:

Compliance and Enforcement

You must comply with the regulations and enforce the scheme in the correct way ensuring each and every qualifying employee has the option of a pension scheme suitable for them. Failing to comply with the rules and regulations of auto enrolment can result in penalty notices, fines and court action.

Keeping Records

Both the employer and pension scheme must keep the following records as proof of compliance. These include: their name, national insurance number, date of birth, gross qualifying earnings in each relevant pay period, contributions payable in each relevant pay period, the date contributions were paid to the scheme, opt in/opt out notices, date with effect from which the worker became an active member.

Creating an action plan

You can complete an action plan which details the specific duties at each stage of auto enrolment.

Safeguards and employer duties

Some of the safeguards come into effect from 1^st July 2012 so all employers must be compliant now and not just from their staging date. The safeguards are intended to protect individuals both before a person begins working for an employer and once the person is a member of the pension scheme.

Donations by individuals, sole traders and partnerships to charity are tax free. This is called tax relief.   The tax goes to you or the charity. How this works depends on whether you donate through Gift Aid, a Payroll Giving scheme, in your will or by donating land, property or shares.

Gift Aid

Your donations will qualify as long as they’re not more than 4 times what you have paid in tax in that tax year (6 April to 5 April). The tax could have been paid on income or capital gains.  You must tell the charities you support if you stop paying enough tax.

If you pay tax at a rate of 40% or above, you can claim the difference between the higher and basic rate on your donation. You can do this through your Self Assessment tax return or by asking HM Revenue and Customs (HMRC) to amend your tax code

Payroll Giving

If your employer, company or personal pension provider runs a Payroll Giving scheme, you can donate straight from your wages or pension. This happens before tax is deducted from your income.

Land, property or shares

You don’t have to pay tax on land, property or shares you donate to charity. This includes selling them for less than their market value. You get tax relief on both Income Tax and Capital Gains Tax

In your will

Your will says what will happen to your money, property and possessions after you die.  Your donation will be taken off the value of your estate before Inheritance Tax is calculated or reduce your Inheritance Tax rate, if more than 10% of your estate is left to charity.  You can donate a fixed amount, an item or what’s left after other gifts have been given out.

Keeping Records

To be able to claim the tax back, you will need to keep records of your donations.

For gift aid donations you must keep records if you:

• pay higher rate tax
• claim tax credits
• get a higher Personal Allowance because of your age
• get Married Couple’s Allowance

If you’re claiming tax back through your Self Assessment tax return or by asking HM Revenue & Customs (HMRC) to amend your tax code keep records showing the date, the amount and which charities you’ve donated to.

Land, buildings and shares

For donations of land, property or shares you need to keep legal documents showing the sale or transfer to charity and any documents from a charity asking you to sell land or shares on its behalf.  You normally have to keep your records for at least 22 months from the end of the tax year they’re for.

There are different guidelines for limited companies

Your limited company pays less Corporation Tax when it gives the following to charity:

• money
• equipment or trading stock (items it makes or sells)
• land, property or shares in another company (shares in your own company don’t qualify)
• employees (on secondment)
• sponsorship payments

You can claim tax relief by deducting the value of your donations from your total business profits before you pay tax.

For more information or if you have any queries, please call us on 0113 864486.

Source and more information at https://www.gov.uk/donating-to-charity/overview