Frequently Asked Questions

In October HMRC announced the Time to Pay service, which allowed self-assessment customers to spread the cost of their tax bill into monthly payments.

The online self-serve service was brought in to help ease any potential financial burden due to the coronavirus pandemic.

For deferrals made for any tax liabilities due by July 31, 2020, these must be paid by January 31, 2021.

The balancing payment for tax year 2019/20 plus first payment on account for 2020/21 also will be due on January 31, 2021.

Once you have completed your tax return for the 2019-20 tax year, you can use the online self-serve 'Time to Pay' service through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.

If you wish to set up your own self-serve 'Time to Pay', you must meet the following requirements:

• No outstanding tax returns

• No other tax debts

• No other HMRC payments set up

• Your Self-Assessment tax bill is between £32 and £30,000

• It is no more than 60 days since the tax was due for payment.

If you do not meet these requirements, you might still qualify for Time to Pay, but you will need to call HMRC to set this up.

If you set up a 'Time to Pay' arrangement, you will have to pay interest on the tax paid late.

Interest will be applied to any outstanding balance from February 1, 2021.

Nick Charnley, tax manager at Ellis & Co said: “It’s great that individual taxpayers have the option to spread their self-assessment tax burden over 12 months during these difficult times but, they should also be mindful that late payment interest will still accrue until the liability is paid in full.”

You can request that HMRC does not publish details about your CJRS claim, if you can show evidence that it would result in serious risk of violence or intimidation to:

• you or anyone living with you.
• an individual associated with your business or anyone living with them.

Examples of individuals associated with your business include:

• an employee
• a director, officer or employee of that company
• a partner, officer or employee of that partnership
• a member or employee of a limited liability partnership
• a settlor, trustee or beneficiary of a trust

You must make this request yourself, we cannot do it for you.

HMRC will not publish any of your details until a decision has been made and you have been informed.

To submit a request, you will need your:

• employer Government Gateway ID and password.
• employer PAYE reference number.
• business name.
• contact details.

You must provide evidence of why you think there would be a serious risk.

Evidence can be:

• written details of why you think publication could lead to the threat of violence or intimidation.
• a police incident number if you’ve already been threatened or attacked.
• photos of a previous threat or attack.
• evidence of possible disruption or targeting.
• any other material which can support your request.

To submit a request click here.

The Budget will be on March 3 and Chancellor Rishi Sunak will make a statement to MPs in the House of Commons outlining the state of the economy and the government's plans for raising or lowering taxes.

The Budget includes decisions on what the government will spend money on and forecasts for how the UK economy could perform in future.

At the upcoming Budget, we expect the government will outline further detail on economic support to help protect jobs and livelihoods across the UK.

That has been their priority throughout the past year, and they state it will be the priority for the year to come.

Yesterday (February 28) we heard the news that the government was set to launch a £5bn fund in England to help the High Street recover from Covid.

The chancellor said the grants, worth up to £18,000 per firm, will help shops and pubs reopen as England eases lockdown.

Details will follow on Wednesday and we will keep you informed and how to claim.

Pre-budget news releases report the Chancellor is set to announce a £126m boost for traineeships in England.

The scheme will include a new "flexi-job" apprenticeship that will enable apprentices to work with a number of different employers in one sector.

The boost to existing apprenticeship and traineeship programmes will include paying up to double the current cash incentive to firms who take on an apprentice, regardless of age.

A mortgage guarantee scheme to help people with small deposits get on the property ladder is also set to be announced and the government will offer incentives to lenders, bringing back 95% mortgages.

There is also talk of the Chancellor announcing the creation of “freeports” to help boost trade and manufacturing.

Freeports are areas around a port or airport, where goods can be imported without having to pay import taxes and these taxes only become payable when the goods leave the freeport and are distributed elsewhere in the UK.

If goods are re-exported they do not have to pay the relevant UK taxes.

The building and operation of freeports in deprived areas could help stimulate the local economy in England.

The other countries of the UK have their own freeport policies.

We will be producing A Special Report: Brexit 2021 once all the details have been announced.

The Statutory Sick Pay Rebate scheme enables small and medium-sized employers to recover Statutory Sick Pay (SSP) payments they have made to their employees.

Employers with fewer than 250 employees who have paid Statutory Sick Pay (SSP) to employees for coronavirus-related sickness absence, could be eligible for support. 

Employers are eligible if they have a PAYE payroll scheme that was created and started before February 28, 2020 and they had fewer than 250 employees before the same date.

The repayment will cover up to two weeks of SSP and is payable if an employee is unable to work because they:

• have coronavirus; or
• are self-isolating and unable to work from home; or
• are shielding because they have been advised that they are at high risk of severe illness from coronavirus

You can check if your business can claim back Statutory Sick Pay paid to employees due to coronavirus (COVID-19) here.

Employers will be able to make their claims through an online service.

This means they will receive repayments at the relevant rate of SSP that they have paid to current or former employees for eligible periods of sickness starting on or after March 13, 2020.

To prepare to make their claim, employers should keep records of all the SSP payments that they wish to claim from HMRC.

If you need assistance with a claim please contact our payroll department on 01244 343504.

Changes to the off-payroll working rules (IR35) will come into force from April 6, 2020.

IR35 rules apply for workers who provide a service to a business, but aren’t actually employed by that business, for example directors of contractor-style limited companies.

Providing services through an intermediary, the worker will have his/her own personal service company / business. 

The IR35 rules ensure that the worker providing a service through an intermediary such as a limited company pays ‘broadly’ the same tax and National Insurance contributions as they would if they were employed.

Under the current rules, if the worker is carrying out work through an intermediary for a customer in the private sector, it is down to the worker to decide their own status.

However, from April the rules are going to change.

All medium and large-sized private sector businesses will be responsible for deciding on a workers status.

However if a worker is carrying out work through an intermediary for a small customer in the private sector, the worker will remain responsible for his/her own status.

It is crucial that employers, employees and the self-employed are prepared for these changes.

HMRC is offering the following advice:

• Identify individuals who are supplying their services through personal service companies in your current workforce (including those engaged through agencies and other intermediaries).
• Determine whether the off-payroll rules apply for any contracts that extend beyond April 2020.
• Talk to your contractors to see if the off-payroll rules apply to their role.
• Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

Further information can be found on HMRC’s website here, or contact Nick Charnley, tax manager at Ellis & Co on 01244 343504.  

Under the Pensions Act 2008, every UK employer must provide a pension scheme for their employees and contribute towards it.

It is compulsory for all employers to automatically enrol their employees into a pension scheme, even if they have one employee.

Three years after auto-enrolment, employers will have to re-enrol employees back into the scheme, including those employees who opted out – this is called re-enrolment.

Employers must also complete a re-declaration of compliance which instructs The Pensions Regulator that they have met your duties.

It is a legal duty to undertake re-enrolment and re-declaration, and you will face a fine if these duties are not carried out.

“We are reminding clients about re-enrolment, which takes place three years after your auto-enrolment start date, and every three years thereafter,” said Zoe Horswill, payroll manager at Ellis & Co.

“You should receive correspondence from The Pensions Regulator when it is time to re-enrol, as well as your deadline date, which is usually three months after your auto-enrolment anniversary.

“However, we would advise clients to prepare beforehand and be aware of their own anniversary date.

“You must also complete a re-declaration of compliance form, which must be completed within five months of the third anniversary staging date,” she added.

Current pension contributions by an employer is 3%, with the 5% shortfall paid by the employee, as shown below.*

For further information about any of the above, or any other payroll matter contact Zoe on 01244 343504.

*Figures from HMRC

If your business buys, or sells, from EU countries (even if once a year), you will be affected by new import and export arrangements coming into force next month.

The UK will leave the EU on October 31, 2019 and if you are a VAT registered business and trade with the EU you will be affected.

HMRC is currently contacting all businesses that trade with the EU, those businesses should now have an Economic Operator Registration and Identification (EORI) number (you will need to contact HMRC if you have not received one).

Businesses without a UK EORI number, which starts with ‘GB’, will not be able to move goods into and out of the UK.

HMRC has prepared the following steps in order to get your business ready for Brexit:

Your business will need:

• A EORI number starting with GB
• Customs forms, to move items in or out of the UK you will need specialist skills and software. Can you do this yourself or will you need a customs expert to do this for you?

If you buy items from the EU to bring into the UK:

• You will need to apply for a simplified import procedure, known as Transitional Simplified Procedures. This is to enable you to get extra time to send in your customs documentation.
• Check the duty you’ll have to pay on items you’re bringing in to the UK.
• Apply for an online account to make paying taxes easier.

If you sell products to the EU:

• Check with the people/company that move your products if they need extra information from you.
• Check with the people you are selling to are ready to bring your goods into their country, are following that country’s customs processes and are ready to send you the relevant paperwork e.g. import declaration.

HMRC will be providing Brexit updates in the run-up to October 31, including regular webinars.

The webinars provides an overview for UK businesses involved in the movement of goods between the EU and the UK, and will be held on a number of dates between now and Friday, October 30.

To register your attendance click here.

*Information provided by HMRC

Changes to the off-payroll working rules (IR35) will come into force from April 6, 2020.

IR35 rules apply for workers who provide a service to a business, but aren’t actually employed by that business, for example directors of contractor-style limited companies.

Providing services through an intermediary, the worker will have his/her own personal service company / partnership or a managed service company.

The IR35 rules ensure that the worker providing a service through an intermediary such as a limited company pays ‘broadly’ the same tax and National Insurance contributions as they would if they were employed.

Under the current rules, if the worker is carrying out work through an intermediary for a customer in the private sector, it is down to the worker to decide their own status.

However, from next April the rules are going to change.

All medium and large-sized private sector businesses will be responsible for deciding on a workers status.

However if a worker is carrying out work through an intermediary for a small customer in the private sector, the worker will remain responsible for his/her own status.

It is crucial that employers, employees and the self-employed are prepared for these changes.

HMRC is offering the following advice:

• Identify individuals who are supplying their services through personal service companies in your current workforce (including those engaged through agencies and other intermediaries).
• Determine whether the off-payroll rule apply for any contracts that extend beyond April 2020.
• Talk to your contractors to see if the off-payroll rules apply to their role.
• Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

Further articles on the changes to the IR35 rules will be discussed in future Ellis & Co newsletters.

Further information can be found on HMRC’s website here.

Certain bank feeds attached to accountancy software packages will no longer work come September.

The industry-wide change comes thanks to the introduction of Open Banking regulations, which means third party bank feed providers such as Yodlee will not work as of September 14.

Open Banking allows you to share data and financial information without sharing login details or passwords, it also promises to offer improved reliability.

Further information on how your accountancy software provider is making the changes, and what you need to do next can be found on the links below:

Xero

FreeAgent

QuickBooks

Sage

If you have any problems switching your bank feeds please contact Anna or one of the team on 01244 343504.

Did you know we need to have your permission to speak to HM Revenue and Customs (HMRC)?

As your agent, Ellis & Co is unable to speak to HMRC about your tax accounts or payroll without your permission.

In order for Ellis & Co to speak to HMRC on your behalf you need to complete a 64-8 form.

The 64-8 form covers authorisation for individual tax affairs (partnerships, trusts, tax credits and individuals under PAYE) and business taxes (VAT, PAYE for employers and Corporation Tax).

If you’re a personal representative you can use form 64-8 in certain circumstances to ask HMRC to deal directly with an agent.*

The form can be downloaded from HMRC’s website, here.

Please note: ensure you have all information to hand in order to complete the form, as a partially completed form cannot be saved.

For further information about 64-8 please contact Peter Way-Rider, tax manager at Ellis & Co Chartered Accountants and Business Advisers on 01244 343504.

*HM Revenue and Customs

If you’re an employer and need to report your expenses and benefits for your employees and directors, you will need to complete a P11D form and then submit a P11D(b) form to HM Revenue & Customs by July 6, 2019.

The benefits and expenses you can claim on fall within the following 14 sections:

• Section A – Assets Transferred (cars, property, good or other assets)
• Section B – Payments made on behalf of the employee
• Section C – Vouchers and credit cards
• Section D – Living Accommodation
• Section E – Mileage allowance payments / passenger payments
• Section F – Cars and car fuel
• Section G – Vans and van fuel
• Section H – Interest free, low interest and notional loans
• Section I – Private medical treatment or insurance
• Section J – Qualifying relocation expenses payments and benefits
• Section K – Services supplied
• Section L – Assets placed at employee’s disposal
• Section M – Other items
• Section N – Expenses payments made on behalf of the employee

A separate P11D form will need to be used for every employee and director.

A copy of this form must also be given to your employees and directors by July 6, 2019.

“It is very important to declare any expenses and benefits,” said Peter Way-Rider, tax manager at Ellis & Co.

“You will be liable for a fine of £100 per 50 employees for each month your P11D(b) is late.

“We submit hundreds of P11D(b) forms to HMRC every year, it is crucial they are filled in correctly and on time.”

For further information on P11Ds contact Peter Way-Rider on 01244 343504.

Millions of businesses are missing out on valuable tax breaks each year.

This is because many businesses don’t know they can claim Research & Development (R&D) Tax Relief, or how to go about it.

R&D Tax Relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

SMEs (a company with less than 250 employees) and large companies can claim back a percentage of the amount they’ve spent on qualifying R&D.

The money can either reduce the company’s corporation tax liability or result in a repayment to the company.

This money is tax free and can be used for anything you wish.

A company can claim for R&D Tax Relief if the project covers the following:

• An advance in science or technology

• Directly contributes to achieving an advance

in science or technology

• Scientific or technological development

The project must relate to your company’s trade, whether that is an existing company or a new company.

Other factors that must be demonstrated to claim R&D:

• Technical uncertainty – There must be an element of technological uncertainty prior to the work commencing and isn’t readily available or deducible by a competent professional working in the field.
• Innovation – If the project has achieved something that no-one (or few people) has achieved.
• Money – You will need to have spent money developing your project.

Are you missing out?

If your business spends money developing or enhancing new products or services in science or technology, then you could receive a cash payment or a reduction on your Corporation Tax Liability.

For example:*

Qualifying expenditure                               £100,000

Additional tax relief at 130%                      £130,000

Total tax saving £230,000 at 19%             £43,700

*Figures correct as of April 1, 2019

NB: Please note that any R&D attracting ‘State Aid’ will qualify for a much lower rate of tax relief.

There are a number of costs that qualify for R&D including:

• Employee costs

• Staff providers

• Materials

• Payments to clinical trials volunteers

• Utilities

• Software

• Subcontracted R&D expenditure

• Capital expenditure

“You must make any claim for R&D Tax Relief in your Corporation Tax Return or amended return,” said Peter Way-Rider, tax manager at Ellis & Co.

“Your time limit for making a claim is two years after the end of the relevant Corporation Tax accounting period.

“We can tell you if you are eligible for R&D Tax Relief, the full list of expenditure allowance and how much you can claim.”

For further information on R&D or any other tax matter contact Peter on 01244 343504.

An increase in the personal allowance rate will see millions of people in the UK paying less tax as of this month.

The tax free personal allowance increased from £11,850 to £12,500 on April 6, 2019.

A typical taxpayer will be paying £130 a year less than last year.

The threshold for higher rate tax will also increase from £46,350 to £50,000.

Income tax rate bands have also changed for the new tax year, as shown in the table below.

For further information about this, or any other tax matter, contact Peter Way-Rider, tax manager at Ellis & Co on 01244 343504.

*Figures from HMRC

The new tax year will see a number of changes in the world of payroll.  

As of April 2019 the National Minimum Wage will increase, as will Statutory Sick Pay, and Maternity / Paternity / Adoption Pay.

The rate of pension contributions will also increase and all employees will have the right to receive an itemised pay statement.

Here is what you need to know:

National Minimum/Living Wage

The rates for both National Minimum Wage and National Living Wage will increase on April 1, 2019.

*Apprentices are entitled to this rate if they are aged under 19, or aged over 19 and in the first year of their apprenticeship.

Statutory Sick Pay

As of April 6, 2019 Statutory Sick Pay (SSP) rates will increase from £92.05 to £94.25. Note that if an employee earns less than £118 per week they will not be entitled to any SSP.

Statutory Maternity / Paternity / Adoption Pay

As of April 7, 2019 Statutory Maternity/ Paternity / Adoption Pay rates will increase from £145.18 to £148.68. Note that if an employee earns less than £118 per week they will not be entitled to any statutory pay.

Itemised payslips

As of April 6, 2019 all employees will have the right to receive an itemised pay slip.

Where pay varies according to time worked the employer will have to include the total number of hours worked for which variable pay is received.

This can be done as an aggregate figure or separate figures for different types of work or different rates of pay.

Pensions

Contributions for automatic enrolment pensions will increase from April 6, 2019.

Under the Pensions Act 2008, every UK employer must provide a pension scheme for their employees and contribute towards it.

It is compulsory for all employers to automatically enrol their employees into a pension scheme, even if they have one employee.

The contributions are required to increase over time, this second increase will see total contributions jump from 5% (current rate) to 8% (April 6, 2019 rate).

The minimum contribution (2019) by an employer will be 5%, the 3% shortfall is then paid by the employee.

The table below demonstrates the phases of contribution increases*

“The minimum amount paid into your workplace pension, both by the employer and employee, is going to increase on April 6 this year,” said Zoe Horswill, payroll manager at Ellis & Co.

“The increase will be automatic so does not require any action.

“However, we are reminding clients about re-enrolment, which takes place three years after your auto-enrolment start date, and every three years thereafter.

“Employers will have to re-enrol all staff members who want to contribute to the scheme, employees who opted out will need to opt themselves out of the scheme once again.”

For further information about any of the above changes, or any other payroll matter contact Zoe on 01244 343504.

*Figures from HMRC

With only seven days to go, more than 760,000 people are still to renew their tax credits.

HMRC is warning that if renews aren’t made by the deadline of Wednesday, July 31 payments will stop.

 “The 31 July deadline is fast approaching and renewing your tax credits is something too important to forget,” said Angela MacDonald, HMRC’s director general of Customer services.

“HMRC support is available at all times of the day and night via GOV.UK and the smartphone app to help customers get their renewals right.”

Did you know that an employer may spend up to £150 per head (inclusive of VAT) per year, in providing annual functions and events to entertain its staff?

There is an exemption from tax, National Insurance and reporting if you provide a party or similar function for employees as long as it meets the following three conditions:

• £150 or less per head
• annual, such as a summer barbecue or Christmas party
• open to all your employees

As long as the £150 per head limit is not exceeded, multiple events can be held throughout the year.

If any of the events cost less than £150 per head, you may be able to count these costs as exempt.

However, you can’t do this if you’ve already used up the £150 exemption on another event.

“If say, there were three annual functions of £70 each per employee, the taxation would cover two of them and the employee would be taxed on the third event,” said Peter Way-Rider, tax manager at Ellis & Co.

For further information about non-taxable payments or benefits, or any other tax matter contact Peter Way-Rider on 01244 343504. 

Cloud accountancy software is revolutionising the way in which business owners deal with their day to day accounting; our team is working hard to train and guide our clients through the process.

Making Tax Digital (MTD) is HMRC’s plan to modernise the tax system that will mark a fundamental change in the way that businesses interact with HMRC. 

From 2019 interaction with HMRC will become increasingly digital, with businesses using Cloud accountancy software packages to record business activity. 

Spreadsheets will no longer be the norm, instead software will link directly to your business bank account so that transitions are automatically captured and included within your accounts on a daily basis.

No more receipts clogging up your desk drawers, you can now take a photograph of your petrol receipt and upload it direct to your accounting app; updating records in seconds.

No more preparing sale invoices to be sent in the post, instead you can create and send them directly to your clients from your phone, and sales figures will be updated instantly within the software.

Data is stored in the cloud and can be accessed by any computer / smartphone with internet access 24 hours a day – seven days a week.

We are ‘ahead of the game’ here at Ellis & Co and offering a service that we know no other accountants in the area offer.

Anna Rowson-Smith, Ellis & Co’s software specialist is helping our clients make the move to cloud accounting; providing three hours of FREE set up and training to all our clients.

Anna has recently added another certificate to her collection and become a QuickBooks Online Cerified ProAdvisor. 

Anna joins colleague Alison Howell and an elite group of ProAdvisors with the skills to better help clients with complex business needs.

“Huge congratulations to Anna on passing her QuickBooks Online Core certification exam,” said Robert Ellis, director of Ellis & Co Chartered Accountants and Business Advisers.

“We are delighted to have another certified ProAdvisor here at Elis & Co.”

The team will be continuing to host Making Tax Digital seminars throughout the year, dates and further details will be announced via our newsletter, website and social media channels.

For further information about Making Tax Digital and accountancy software contact Anna Rowson-Smith on 01244 343504.

April 2018 will see a £3,000 reduction in the tax-free dividend allowance.

The allowance, for shareholders and directors of small private firms, will decrease from £5,000 to £2,000 from April 5, 2018.

According to HM Revenue and Customs (HMRC) the change will affect individuals and households who receive dividend income in excess of £2,000; It is estimated that this will affect around 2.27 million individuals in 2018 to 2019 with an average loss of around £315.*

The reduction was announced by The Chancellor Phillip Hammond during his Spring Budget Speech last year (2017).

It was a move designed to provide ‘fairness’ and ‘reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors’.

“This measure will ensure that support for investors is more effectively targeted and that the total amount of income they can receive tax-free is fairer and more affordable, in light of increases to the tax-free personal allowance and the Individual Savings Accounts (ISA) allowance,” said HMRC.

“It will also partially reduce the tax difference between the self-employed and those working through a company.”

The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor.

The move is expected to raise £2.63bn by 2021/22.

*Figures from www.gov.uk

Did you know an asset bought for your business, with an expected life of two or more years, does not qualify for normal tax deductions?

You may though be entitled to claim capital allowances (CAs); the most common asset which qualifies for CAs comes under the category plant and machinery.

Machinery ‘an object with moving parts that performs a function’, can cover anything from clocks to printers.

Plant is trickier and is the subject of regular disputes with HMRC.

“A plant is an asset which isn’t a building, structure or machinery and has a function for your business,” said Peter Way-Rider, tax manager at Ellis & Co.

“For example a special bracket needed to hold a machine in place would be classed as an item of plant, this may be an expensive item so ensure it is categorised correctly so you don’t miss out on a CAs claim.”

For advice on this or any other tax matter contact Peter on 01244 343504.

Are you ready for the new General Data Protection Regulations (GDPR)?

European data protection laws are changing and come into force on May 25, 2018.

These new laws will affect all businesses in the UK and the current Data Protection Act (DPA) will be updated to reflect the GDPR obligations.

The GDPR is a framework with greater scope, much tougher punishments and judicial remedy for those who fail to comply with new rules around the storage and handling pf personal data, be it in physical or electronic format.

Why are these new laws being introduced?

Since the DPA was introduced in 1998 technology and the internet have developed at such a rapid rate that these rules are now deemed to be ineffective.

Nowadays, the ease and sophistication of data collection means that thousands of SMEs not only collect personal details, but store, move and access them online.

Personal data is used in everything from sales to customer relationship management to marketing.

A recent report form the Federation of Small Businesses (FSB) claims that SMEs are now more likely to be targeted by cybercriminals than their large corporate counterparts and cybercriminals consider SMEs softer targets.

The GDPR is considered a necessity for the protection of data in a modern internet based society.

What does GDPR mean for SMEs?

Businesses must keep a detailed record of how and when an individual gives consent to store and use their personal data. This means a positive agreement and cannot be inferred from a pre-ticked box.

Customers or individuals have the right to withdraw consent.

Details must be permanently erased.

This means businesses should review their existing data and delete any that they do not have a valid reason to hold it.

The GDPR sets out the legal bases available for processing personal data such as needing it to perform a business contract.

Businesses should review what data they hold, have they got consent and do they need to keep it?

Data should be kept secure and this will require a review of current practices to prevent data breaches.

Personal data is a key tool for SMEs looking to target and retain customers: GDPR means it must be handled with the utmost care.

You should start planning for the GDPR now and consider an information audit and, for many businesses, a change in culture.

In summary, you will be required to:

• Prepare and maintain documentation on your policy and for compliance with the GDPR.
• Appoint someone in your business to the point of contact for data protection.
• Review existing procedures for weaknesses and areas to strengthen ahead of the new regulations.
• Ensure you have a legal basis to hold personal data and have a valid reason for holding it.
• Ensure you keep any data protected and secure.
• Have procedures for reporting date breaches.
• Keep your records up to date.  

How can we help?

We can introduce you to an expert in this area who can perform an information audit and work with you towards GDPR compliance.

For further information contact us on 01244 343504 or email info@ellis-uk.com

From 2019 interaction with HMRC will become increasingly digital, with businesses using Cloud accountancy software packages to record business activity. 

The end of the tax return is nigh, digital tax is to become a reality… are you ready?

Making Tax Digital (MTD) is a £1.3bn investment programme that will mark a fundamental change in the way that businesses interact with HMRC.

Spreadsheets will no longer be the norm and software will instead link directly to your business bank account, so transactions are automatically captured and included within your accounts on a daily basis.

No more receipts clogging up your desk drawers; you can now take a photograph of your petrol receipt and upload it directly to your accounting app, meaning your records are updated in seconds.

No more preparing sales invoices to be sent in the post; instead, you can create and send them directly to your clients from your phone, and your sales figures will be updated instantly within the software.

And you will never have to worry about back-ups of your accounting software again!

See your accounting figures 24/7, 365 days a year all from your Smart Phone.

HMRC issued ‘Making Tax Digital’ in 2015, announcing these big changes for 2018 and eventually becoming fully digital by 2020; meaning that businesses have a time frame to move from the desktop to a cloud package. 

We are encouraging our clients to switch to cloud accountancy software now.

Ellis & Co Accountants and Business Advisers are experts in Sage, Xero, QuickBooks and FreeAgent accounting software.

Our software specialist Anna Rowson-Smith will be with you every step of the way; offering impartial advice from the start; Anna will review your needs, your resources and offer a solution that is best for you.

Anna also provides three hours of FREE set-up and training to all our clients.

For further information, or to sign up today, email annarowson-smith@ellis-uk.com or call 01244 343504. 

The number of R&D claims made by SMEs has risen by 22% in the last year.*

R&D tax relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

A cash payment or a reduction on a company’s Corporation Tax liability is given to a businesses that spends money developing new or enhancing products or services in science or technology.

The increase of 22% was primarily driven by a rise in the number of SME claims, which totalled 21,865 in 2015-16, up from 17,875 in 2014-15.

HM Revenue & Customs (HMRC) said the increase in the number of claims is likely to reflect the effect of changes made to the SME scheme from April 2012 onwards.

The removal of the requirement for a minimum R&D expenditure of £10,000 has meant that more companies are eligible to apply for the relief.

The most common way for SMEs to claim R&D tax credits was by a deduction from corporation tax (CT) liability, with 12,700 claims made this way for 2015-16, compared to 4,420 claims made for a payable credit.

“Many businesses don’t know they can claim R&D tax relief, or how to go about it,” said Peter Way-Rider, tax manager at Ellis & Co.

“There are a number of costs that qualify for R&D including employee costs, materials, utilities and software.

“The normal time limit for making your claim is two years after the end of the relevant Corporation Tax accounting period.

“This means that even though you may have already filled a Corporation Tax return, you can amend this to reflect any relevant R&D expenditure as long as the amended return is filled within the time limits.”

Ellis & Co can tell you if you are eligible for R&D relief, the full list of expenditure allowable and how much you can claim.

"With December 31 approaching ever more quickly, the opportunity for companies to make an R&D claim for the year ending December, 31, 2015 is running out," added Peter. 

"This relief is extremely valuable so if you think you could be entitled to make a claim for R & D, please contact us as soon as possible."

To find out more contact Peter Way-Rider on 01244 343504. 

*www.gov.uk 

One in four small businesses are affected by fraud in the UK every year, with an estimated loss of £18.9 billion*.

A number of big companies including Amazon and Paypal have spoken out about fraudulent activity; asking members of the public to ignore ‘phishing’ emails, to not respond to text messages and never give out any personal information.

But fraud has many categories and it seems no one is save: identity theft; online fraud; bank fraud; pension scams; holiday fraud; facility takeover and receipt fraud.

13,223 cases of fraud have been reported within Greater London in the last five months alone.*, 3.8 million cases of fraud and 2 million cybercrimes were reported in the UK in 2016.**

HM Revenue and Customs (HMRC) has also made warnings regarding recent fake tax rebate scam emails; text messages, social media and the most recent - create a Government Gateway account scams.

“Some websites, emails or phone numbers can look like they’re part of an official government service or that they provide more help than they actually do,” said HMRC.

“This might mean you pay for services that you could get cheaper or for free if you used the official government service, for example renewing a passport.

“HM Revenue and Customs (HMRC) will never use texts or emails to tell you about a tax rebate or penalty or ask for personal or payment information.”

Action Fraud, the UK’s national reporting centre for fraud and cyber crime, deals with reports of scamming, defrauding and cyber crime from across the country.

Here are some of the scams Action Fraud is currently warning the public about:

Jaff ransomware

Jaff ransomware is currently being distributed in phishing campaigns sent out by cyber criminals.

A phishing campaign is when fraudsters ‘fish’ for victims by sending urgent messages via emails, text messages, phone calls and social media in order to gain access to personal data and bank accounts.

The Jaff ransomware is sent by email as an attached PDF disguised as an invoice/scans.

When opened the ransomware changes all file extensions, the desktop background and places a ReadMe.txt or ReadMe.html which directs victims to a website to pay for the decryption of files.

Invoice scams

Business owners are being warned about a fake invoice scam, where an invoice or bill is sent to a company asking for payment for services or goods.

The invoice says the payment is past its due date and non-payment will affect credit rating.

Fake BT bills

A new fake email currently being sent out steals personal information including usernames and passwords by ‘eavesdropping’.

The email claiming to be from BT is called ‘New BT bill’ and contains a link that once clicked starts up Dridex malware and downloads without even opening a new webpage.

BT have released a statement in light of this email to clarify that ‘BT would never send an email with an attachment.’

WhatsApp

WhatsApp is an instant messaging service used by more than one billion people in over 180 countries – it is also used by fraudsters.

Messages are being sent to users claiming to be from WhatsApp saying their subscription will be ‘ending soon’ and asking for banking details for it to be renewed.

WhatsApp is free, however is didn’t used to be before 2016, so old users of the service are being caught out and the fraudsters are gaining banking and personal information.

How to protect yourself*

• Don’t click on links, or open any attachments.
• Always install software updates as soon as they’re available.
• Install anti-virus software on your computer and mobile devices, and keep it updated. Create regular backups of your important files to an external hard drive, memory stick or online storage provider.
• If you have clicked on the links, run antivirus software.
• Fraudsters ‘spoof’ an email address to make it look like one used by someone you trust. Check the email header to identify the true source.
• Don’t assume anyone who has tried to contact you (via email/phone) is who they say they are.
• If you are asked to make a payment, log in to an online account or offered a deal, be cautious. Real banks never email you for passwords or any other sensitive information. If you get a call from someone who claims to be from your bank, don't give away any personal details.
• Make sure your spam filter is on your emails. If you find a suspicious email, mark it as spam and delete it to keep out similar emails in future.
• If in doubt, check it’s genuine by asking the company itself.

How to protect your business*

• Know your customers – Fraudsters can pose as a customer, using forged currency, someone else’s payment card or requesting ‘store credit’ with no intention of paying you back. Make sure your sales are guaranteed and learn how to protect your business if any payments fail. Watch out for suspicious orders and use your common business sense.
• Know your employees – Nearly one in five small businesses have been defrauded by an employee. An employee has access to your key assets and how to get around any processes. Fraudulent activity in the workplace includes: theft of goods, misusing company credit cards, colluding with suppliers and submitting false travel claims. Make sure you know who you are employing and ask for references. Adopt an anti-fraud policy statement.
• Know your suppliers – More than 670,000 businesses have fallen victim to a fake invoice fraud at some point in their trading history. It is important that you know who your supplier is – do your research before choosing a supplier (for example visiting Companies House for their business records). Check that you are only paying for the goods/services you’ve received and monitor behaviour and performance.
• Know your assets – Make a list of your key assets (machinery, stock, money, data) and think of a way of securing them (insurance, online data protection). Restrict access to your assets. Protect your identity.

Report it

Report fraud, attempted fraud or cyber crime to Action Fraud online or call 0300 123 2040.

*www.actionfraud.police.uk  

**Based on survey results from the Office for National Statistics (ONS).

Did you know you can earn tax-free cash from renting out a room in your home?

The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation.

You can let out as much of your home as you want, but the £7,500 threshold will be halved if you share the income with someone else.

“You don’t need to do anything if you earn less than the threshold, the tax exemption is automatic,” said Peter Way-Rider, tax manager at Ellis & Co.

“If you earn more than the £7,500 threshold you will need to complete a tax return and opt in to the scheme to make your claim.

“If you do not want to opt in to the scheme but still wish to make a claim you can record the amount in the income and expenses property pages of your tax return.”

You can opt in to the scheme at any time if:

• You are a resident landlord, whether or not you own your home
• You run a bed and breakfast or a guest house

You cannot use the scheme for homes converted into separate flats.

For further information on this or any other tax matter contact Peter Way-Rider on 01244 343504. 

The personal allowance (the amount of income which you don’t pay tax on) rose from £11,000 in the last tax year to £11,500. For most people, this will result in an increase in pay of £100 per year.

Above this figure, most income (e.g. salary) is taxed at 20% up to the higher rate tax threshold.

The higher-rate tax threshold rose from £43,000 in tax year 2016/17 to £45,000 with effect from April 6th, 2017.

Above the higher rate tax threshold, most income is taxed at 40% up to £100,000.

For income between £100,000 and £123,000 there is a marginal tax rate of 60% as the personal allowance is gradually withdrawn.

Note that dividend income is taxed differently, and for most people they will also have to pay National Insurance as well as personal tax.

The new ISA allowance for the tax year 2017/18 is now in force.

An ISA (Individual Savings Account) is a tax-free way to save or invest.

As of April 6, 2017 the ISA limit for this tax year is £20,000, meaning you can pay up to £20,000 into one ISA account (or across multiple ISA accounts) tax-free.  

There are four main types of ISA: cash ISA, Help to Buy ISAs, innovative finance ISAs and stocks and shares ISAs.

“The ISA allowance is set by the government each year, so the allowance doesn’t roll over to the next tax year, so if you don’t use it you will lose it,” said Peter Way-Rider, tax manager at Ellis & Co.

“To gain maximum benefit from your ISA you should open it at the start of the tax year (April 6), failing that as close to this date as you can.

“You can open multiple ISAs but cannot pay in more than £20,000, every individual has the right to open an ISA, the Junior ISA allowance for 2017/18 is £4,128.”

Yes it is possible to pay into your ‘pension pot’ to reduce your personal tax liability.

For the current tax year, you can get tax relief on pension contributions of up to £40,000.

But, you will have to move quickly - any payments must be made by the end of the tax year, before April 5^th, 2017. 

I have a personal tax bill due by 31st January 2017. How is it best to pay this?

As this is a personal tax liability (and not a company liability), ideally it should be paid from personal funds.

If the company has sufficient reserves it is possible to declare an additional dividend in January in order to pay the tax bill, however this dividend would be treated as personal income and would therefore increase any personal tax liability for the current tax year to 5 April 2017.

Alternatively if the company owes you money (i.e. there is a credit balance on your director’s loan account) you could use this balance to pay the tax bill.

As a last resort you could pay a bonus or borrow money from the company, however there are further tax implications to these options.

Please give us at Ellis & Co a call if you would like to discuss any of the above.

You have to pay your corporation tax within nine months and 1 day of the end of the accounting period for your business’s previous financial year. In most cases, the year end is March 31 which would mean corporation tax would be due January 1 of the following year.

If your financial year ends on December 31, you would need to settle October 1.

No exception is made should you extend your accounting period to 18 months.

When do I need to pay my self-assessment tax?

This is one of the least enjoyable aspects of self-employment – first, the rush to meet the self-assessment deadline and then having to meet the resulting tax bill.

Payments on Account is the tax payment method by which the self-employed pay off their tax liability in twice yearly instalments.

The first instalment is due on January 31 (the same day as your ‘balancing payment’ which clears your tax bill for the previous tax year) and the second is due on July 31.

Each tax year runs from 6 April to 5 April so the 2015-2016 tax year covers profits made in your accounting year that ended between 6 April 2015 and 5 April 2016.

• The profits you made in this period must be declared in your 2015-16 tax return. Deadlines for submission are 31 October 2016 for a paper return and 31 January 2017 for an online return.
• Tax due must be paid by 31 January 2017.

A VAT registered business can reclaim VAT on travel expenses for business trips including meals and accommodation. You should keep evidence of the expense (a VAT invoice). There is generally no VAT on public transport expenditure (e.g. buses, trains, flights), but there may be VAT on taxi costs if the taxi driver is VAT registered.

If you use one mobile phone for both business and personal reasons many people ask if they can claim the full cost back through the business.

In actual fact the answer is no and you can only claim allowable expenses for the actual business costs.

For Example

If you have a mobile phone contract in your personal name ( and not the business name) and you use it for business as well as personal use you can claim the business share of it back

E.g. your mobile phone bill for the year is £180 and £120 of this is on business calls and £60 on personal calls. You can claim for £120 for business expenses.
It is the same if you have a contract in the business name as the business pays the bill and there is no benefit in kind for any personal element so you can’t claim any personal usage.

HM Revenue & Customs seeks to concentrate their resources in areas where they consider tax is being lost and in recent years they have increased the nature and scope of their compliance visits. This article explains what to expect during a HMRC PAYE inspection.

Grounds for a PAYE/VAT Inspection

While there is no specific reason required for an inspection, there are several trigger points that can increase the likelihood of your company being inspected. These include:-

• Returning company cars without fuel benefit on P11Ds
• P11Ds or P35 forms submitted late
• Information on submitted forms found to be incorrect
• Business has a history of being assessed on previous visits
• Late in filing returns or making payment
• HMRC having uncovered errors in similar businesses or industries

The Inspection: What are HMRC looking for?

HMRC are looking to find errors for which they can charge additional interest and a penalty. They will want to ensure that you are declaring what they perceive to be the “right tax” at the “right time”.

So what happens during the visit?

An introductory discussion with the owner/manager/officers to:

• Review the activities of the business and note any changes since the last inspection
• Invite the submission of any voluntary disclosures you might want to make
• An “inspection” of your business premises to ensure all activities being carried on from them is reflected in your PAYE/ VAT Account.
• A comparison of at least one year’s annual accounts (usually the last year completed by your accountant or auditor) with both the declared sales and Output tax and the Taxable purchases and Input tax shown on the corresponding VAT returns.
• A review of the payroll records to confirm that deductions are made in the correct manner and areas such as sick pay, starters and leavers are correctly recorded
• A ‘walkthrough’ from your primary accounting records to the accounts to confirm there is a correct process for recording the relevant PAYE/VAT data.
• For VAT only, if the business is operating a special scheme, is this being done correctly?

After the visit

If all goes well you may receive a letter from HMRC confirming that there are no areas of concern. If additional tax is payable this will be reflected in a formal assessment on the business, with details as to how the figures have arose.

A dividend is a payment which a limited company can make to its shareholders out of post-tax profits.

For many small companies, the shareholders are also the directors, and it is often tax-efficient for director-shareholders to pay themselves a small salary and dividends rather than a larger salary.

Before a dividend can be declared, the company’s retained profits should be checked to confirm that they are sufficient to cover the dividend. The company should then have a meeting of directors and document the dividend by producing board minutes and dividend vouchers.

A dividend may be illegal if the company does not have sufficient retained profits (after tax), or if the dividend is not correctly documented.

Once declared a dividend can be paid from the company bank account, or credited to a shareholder’s loan account to be paid at a later date.

If you would like to know more about dividends or have any specific questions, please contact John Moorhouse on 01244 343504 or email johnmoorhouse@ellis-uk.com

If a company car is made available for your private use, you will pay additional benefit-in-kind tax, based on the car’s original list price and co2 emissions.

In recent years, the percentages used to calculate the benefits-in-kind have been creeping up, making it more expensive to buy and use a company car.

A further benefit-in-kind is incurred if the company pays for all fuel, including fuel used for non-business journeys. See the online calculator on our website to calculate the taxable benefits-in-kind.

In addition, the corporation tax relief available for car purchases (i.e. the corporation tax saved as a result of purchasing a car) is restricted, and again based on co2 emissions.

It is therefore often cheaper to purchase cars privately and claim mileage under the fixed profit car scheme.

However, if the car you are looking at has very low co2 emissions (or no co2 emissions in the case of some electric vehicles) it can be cost-effective to purchase through a limited company.

If you would like to check how much a company car may cost in additional tax, please contact us on 01244 343 504.