Got ideas buzzing about your business? Let's talk! Schedule a hassle-free, commitment-free consultation at your convenience. Whether it's a Zoom call, MS Teams meeting, or a good old-fashioned phone chat, we adapt to your style. In this initial conversation, share your business vision and queries. From there, we'll whip up a tailored proposal, open for your comments and revisions until it's just right. Give us a shout — let's see what we can achieve together!
We are delighted to announce that Freddie Faure, Lindsay Kantorowicz and Emma Kiviniemi Andersson have qualified as Xero Certified Advisors.
Whether you have implemented Xero and want to unlock its full potential or are looking to migrate to the software, we have the expertise to navigate you through the process from the basic set-up through to developing sophisticated reports.
In a further development, we have implemented Digita, a Thomson Reuters product, to integrate with Xero to seamlessly produce the draft Annual Accounts and the Corporation Tax return.
Already a Xero Gold Partner and with other system implementations on the horizon, this represents a major step to define CooperFaure as the Silicon Valley of Accounting.
If you would like any assistance or advice on Xero or Digita, please email us at welcome@cooperfaure.co.uk for an initial consultation.
On Wednesday 23rd November, Philip Hammond will be delivering his first Autumn Statement as Chancellor of the Exchequer.
Although three months have passed since the EU Referendum and the government repeats the mantra of ‘Brexit means Brexit’, it is still totally unclear exactly what Brexit means.
Against this backdrop, the 2016 Autumn Statement is seminal in shoring up business confidence in these uncertain times. We have advocated restoring the small profits rate of Corporation Tax and setting it at 15% and locking the rate at 5% below the main rate.
On Thursday 24th November, we will be hosting a Free Webinar on the Autumn Statement between 1pm and 2pm. We will be looking at the impact on the entrepreneur, the contractor and the property investor. As well as expert advice and a free copy of the presentation, you can ask that nagging question in our Q&A session.
As ever, places are limited so please click here to register.
The government has accepted the recommendations from The Low Pay Commission to increase the National Minimum Wage for workers aged under 25 and apprentices with effect from 1st October 2016. The changes include:
For workers aged 25 and over, National Living Wage remains at £7.20 an hour.
In a departure from previous years, these new rates are set to last for six months only until 31st March 2017. This is to harmonize the National Minimum Wage and The National Living Wage cycles with new rates for all five categories from 1st April 2017 expected to be announced in the Autumn Statement.
A new business starts on a wave of optimism and enthusiasm whether it be to pursue your dream, to develop a new product or to leverage your talent.
In many cases, the business is incorporated into a Limited Company with a friend, colleague or partner to share the journey and it seems only fair to divide the shares on a 50:50 basis.
Unwittingly, by adopting this structure, you have both just created the potential for deadlock which could have dire consequences in the years ahead.
Like relationships in life, a business relationship can breakdown with irreconcilable differences. If the fall out means that neither shareholder can agree on the business strategy, the company is in deadlock and no decisions can be advanced.
Whilst there are remedies, it is important to recognize that this situation is not catered for in the model Articles of Association when the company is incorporated.
Deadlock is damaging for any business but particularly in the early years where finances and deliverables tend to be tight and the reputational harm can be irreparable.
Should you end up in this unwelcome situation, it is vital that you take action as the future of your business is in peril. The problem is that the remedies at this stage are likely to carry a punitive cost whether it be initiating a court action or seeking to injunct a formal negotiation process.
The first step is to engage a commercial lawyer to advise you of your rights and steer you through the process.
However, this could all have been avoided at the outset by putting a simple Shareholders’ Agreement in place as part of the overall business set-up process.
A Shareholders’ Agreement is a private contract between the parties unlike the Articles of Association that are in the public domain. As such, it provides a framework to formalise a process to resolve a deadlock discreetly.
A Shareholder’s Agreement is also platform to define in detail the rights and the responsibilities of shareholders with regards to the management of the business, the treatment of shares and dividends and their exit strategy.
Another risk from deadlock is that it will lead to diverting profits. It is important to be aware that, whilst the Directors have a fiduciary duty to act in the best interests of the business this does not automatically apply to shareholders. As such, without a Shareholders’ Agreement specifying otherwise, there is nothing to prevent a shareholder establishing a competing business and plundering your business’s employees and customers and, effectively, diverting your profits.
As a Shareholders’ Agreement is additional cost at the time when the business is a kernel of an idea and all-consuming, plus it can be perceived to infer a lack of trust, all too often the founders defer or ignore the issue.
The reality is that there is no better time than the early days to address this whilst the plans and expectations of the founders are fully aligned and the business structure is straightforward.
‘Kicking the can down the road’ invariables results in a costlier Shareholders’ Agreement both as the business matures and adds complexity and as views diverge. On the occasions when deadlock occurs it is too late!
At CooperFaure, we can guide you through the issues that you need to consider and prepare a Shareholders’ Agreement for your business. For further information, please contact us at tax@cooperfaure.co.uk.
The date for the court hearing to decide whether there should be a judicial review of the tax changes to mortgage interest relief on buy-to-let properties has been moved.
This hearing was originally due today but has been rescheduled to Thursday 6th October at the request of HMRC who indicated that their lawyers were not available this week.
The court date in October will determine whether the case put forward by landlords Steve Bolton and Chris Cooper is sufficiently compelling to warrant a full judicial review. However, this is not an indicator that the action will ultimately be successful. We will be reporting as events unfold.
Amongst a whole host of HMRC consultations that are underway is one looking at “salary sacrifice for the provision of benefits in kind” with a view to introducing reforms from April 2017.
Since the turn of the decade, the level of PAYE clearance requests for salary sacrifice schemes has risen by over 30% and there is little doubt that the potential tax savings have been a contributory factor to this increase.
At the moment, under a salary sacrifice or flexible benefit scheme, an employee may be offered a benefit in return for a compensating reduction in salary and there is no restriction on what the benefit can be.
Take the example of a corporate gym membership that costs £700.00 per year. If this is provided to an employee under a salary sacrifice scheme, the cost to the employee in the basic rate tax band in the reduction of net pay would be £476.00. The remaining £224.00 would be funded by reduced Income Tax and National Insurance deductions from the lower salary. Moreover, the employer would save £96.60 of Employer’s National Insurance contributions.
For an employee in the higher rate tax band, the cost would be £406.00 and the Income Tax and National Insurance savings would be £294.00. The employer’s element remains the same.
The government is proposing that, from April 2017, the gym membership itself would be treated as a benefit in kind and, therefore, there would be no tax saving for either the employee or employer.
For the following specific areas, there will be no change to the current system with the tax savings remaining:
Whilst the proposals do not impose any constraint on the benefits an employer can offer under a salary sacrifice arrangement, everything else would be taxed as a benefit in kind.
Therefore, the only potential upside for the gym membership in our example or, say, a mobile phone contract or laptop, would be if the buying power of the company enabled it to attract a better price than the individual.
The taxable benefit in kind is set to start from 6th April 2017. The consultation document uses the example of and employee that starts to sacrifice £600.00 per year for a workplace parking space in September 2016. Until 5th April 2017, there continues to be no Income Tax or National Insurance due on the parking space but from 6th April 2017 it will be treated as taxable.
Employers would be required to report these taxable benefits in kind provided through salary sacrifice to HMRC in the same manner as other taxable benefits in kind that they already report, such as company cars or private medical insurance. Usually, this requirement is met by submitting P11Ds at the end of the tax year.
In our response to the consultation that we will be submitting at the beginning of October, we will highlight two main concerns.
Firstly, from the employee’s perspective, there will be no visibility that anything has changed. Taking the consultation document example, the payslip in March 2017 and April 2017 will be identical with a £50.00 salary sacrifice for the parking space reducing the gross pay.
It will only be when the P11D is submitted at around July 2018 that the tax liability for the 2017-18 would become apparent to HMRC and the tax would fall due.
Secondly, whilst the parking space is clearly optional and the employee can choose to end the arrangement at the end of March 2017, no provision has been made for instances where the employee is locked into an arrangement. For example, a two-year mobile phone contract with a third party vendor.
The employer and employee have made an arrangement in good faith under one set of rules only for these to change part way through with no exit strategy.
Whilst at the margin salary sacrifice or flexible benefit arrangements have been used to manipulate an employee’s income to reduce Student Loan repayments or to enable the continued entitlement to Child Benefit, broadly speaking these schemes have been operated as a genuine incentive to staff.
Although HMRC estimate that the overall cost to the Exchequer is in the region of £5 billion a year, it is clear that the vast amount of this is driven by pension contributions and childcare schemes that will remain unchanged.
As a result, we believe that it would be far more fair and equitable for this change to apply to new arrangements from 6th April 2017 onwards and for the resulting additional tax to be collected via the payroll rather than the P11D process.
If you have any questions, comments or concerns on this HMRC proposal, please email us at tax@cooperfaure.co.uk.
An ever-increasing number of property owners are offering their home for a short-term let either around sporting events like Wimbledon or through Airbnb whilst on vacation.
A common misconception is that the income received is covered by the Rent a Room scheme but this is not the case if the whole property is let out.
In these cases, the income must be declared on a Self-Assessment Tax Return and the resulting tax paid accordingly. This is an area HMRC are focusing on as part of their crack down on tax evasion.
You would qualify for the Rent a Room scheme if you are a resident landlord letting out a part of your only or main home on a furnished basis. This can be a room or an entire floor but not a purpose-built flat within the premises.
For the 2016-17 tax year, the scheme allows you to earn up to £7,500 per year tax-free. For the 2015-16 tax year, the threshold was £4,250. These thresholds apply to the property and would be halved if you share the income with your partner or someone else. Should you elect to charge for additional services such as meals or laundry, all payments received must be added to the rent in determining your total income.
If your overall income is below the threshold, the tax exemption is automatic and there is no requirement to report this to HMRC.
However, you must complete a tax return if you earn more than the threshold. If this is the case, you can either opt into the scheme and claim your tax-free allowance or, instead, record your income and expenses in the property section of your tax return.
In theory, you can be a resident landlord irrespective of whether or not you own your home but, if you are a lodger, you need to be certain that your tenancy agreement allows you to take in a lodger.
The manner in which you share your home impacts the kind of tenancy the lodger has and their resulting rights and how the tenancy can be ended.
For the resident landlord, your lodger is deemed to be an ‘excluded occupier’ if they share a kitchen, bathroom or living room with you or a member of your family.
If this is the case, you only have to give them reasonable notice to end the letting, which is commonly reckoned to be the length of the rental payment period, and you can evict them without redress to a court order.
If your lodger does not share any living area with you and your family, they would be classed as an ‘occupier with basic protection’.
In this case, you must serve them a written ‘notice to quit’ and the notice period would need to be stipulated in the tenancy agreement. If your lodger refuses to leave, you would need a court order to evict them.
There are no restrictions per se on the level of the rent you can charge and this can include Council Tax and utility bills. However, this needs to be agreed with your lodger beforehand.
There are other considerations:
As well as the Income Tax on your rental income, it is important to consider the Capital Gains Tax consequences.
You are entitled to full Private Residence Relief, which would mean the gain on the sale of your home would be exempt from Capital Gains Tax when you sell the property, if the following conditions apply:
As a result, whilst it may be tempting to take in more than one lodger at a time, you must bear in mind that this could result in a Capital Gains Tax liability in the future.
If you let rooms to more than two lodgers at the same time, your property would be classed as a House in Multiple Occupation which has far more stringent standards and safety requirements and can require a licence.
If you have any questions around any aspect of renting your property, please email us at tax@cooperfaure.co.uk for an initial, free consultation to discuss your situation.
Last weekend Emma was in Stockholm competing at the Swedish National Athletics Championships in her sport of pole vaulting.
Emma exceeded her ranking by finishing a magnificent fifth with a season’s best clearance of 3.77 metres in a competition where the first and second placed athletes had represented Sweden in the Rio Olympics.
A massive congratulations to our young accountant as she continues her quest to compete for her country at the Tokyo games with the support of the West London Pole Vault team at Brunel University.