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Making Tax Digital Delayed until April 2024

The government announced yesterday that they will delay Making Tax Digital for the Self-Employed and Landlords until April 2024.  This is a year later than originally planned.

Therefore, from 6th April 2024, for all self-employed businesses and landlords with a turnover of over £10,000, the government will replace the Self-Assessment Tax Return with Making Tax Digital.

General partnerships must join Making Tax Digital from the tax year beginning in April 2025.  The government will confirm the date for other types of partnerships in the future.

How do I become Making Tax Digital compliant?

Making Tax Digital will require five filings a year in an electronic format.  Four quarterly reports and a year-end final declaration. 

Whilst HMRC have approved a range of filing formats, submitting these reports on paper will not be an option.

Therefore, if you are not already using systems for your record-keeping and accounts preparation you will need to do the following:

Hence, you can configure the software to remind you when to file and there will also be a cumulative calculation of the tax due for the year based on the data submitted.

What are the payments and when will they be due?

The tax payment due date for 2024-25 will remain the 31st January of the following year.  However, HMRC are indicating that there will be a method to make voluntarily payments based on each submission.

A likely outcome of Making Tax Digital for the Self-Employed and Landlords is that, at some point, these payments will become compulsory.

For the first year there will be additional complexity because your 2023-24 tax return will still be due by 31st January 2025.

The first submission under Making Tax Digital will be due, the government expects, in the fourth month of the accounting period, followed by submissions on a three-monthly basis.

An example Making Tax Digital scenario

If your trading year aligns to the tax year, you must submit your report in August 2024 and the overall calendar will be:

We appreciate that “Making Tax Digital Delayed” may seem an age away with an additional cost in terms of time and money. However, our advice is to embrace the change now.  Ultimately, Making Tax Digital will give you a better overview of your business.

We are already implementing cost-effective solutions for clients to get them ready for Making Tax Digital.

Wondering if you need to submit a tax return? Please see our blog post here to help you answer this question.

If you have any queries or would like any assistance to ensure you are ready, please do not hesitate to contact us on tax@cooperfaure.co.uk.

You can find the official gov.co.uk new release here.

The difference between a business partnership and a LLP

Here we explain the difference between a business partnership and a LLP.

In choosing the better option for you, it is worth bearing in mind that a partner does not have to be an actual person.  A limited company is considered to be a ‘legal person’ and can also be a partner.

business partnership is not a separate legal entity. As a result, you and your partners will be responsible for any losses your business makes and any loan, credit agreements or unpaid bills.

The business is usually regulated by a Partnership Agreement. This agreement sets out the rights and responsibilities of each partner, defines how the profit will be split, how key decisions are made and who will be the nominated partner.

The nominated partner is responsible for managing the partnership tax returns and keeping business records.  All individual partners also need to send their own tax return.

You must register with HMRC as a business partnership and/or a partner by 5th October in your second tax year.  For example, if your partnership started or you became a partner during 2020-21 tax year, you must register before 5th October 2021.

A business partnership carries less administrative burden than an LLP and the accounts are private.  On the other hand, as well as any liabilities remaining with the partners, a business partnership cannot borrow money as an entity.

An LLP (Limited Liability Partnership) is a hybrid between a business partnership and a limited company. An LLP needs to be registered as a company at Companies House and is a legal entity in its own right.

The partners in an LLP are designated as members and are not personally liable for any debts incurred by the partnership. However, an LLP is tax transparent.  In other words, it is does not pay Corporation Tax and the members are responsible for paying the tax on their share of the profits.

Your business name cannot be the same as, or too similar to, another registered name at Companies House (https://find-and-update.company-information.service.gov.uk/company-name-availability)

Your business must end in ‘Limited Liability Partnership’ or ‘LLP’ or the regional equivalents.

An LLP offers limited liability to the partners set at the amount of your capital contributions.  It also carries a legal status which means it can trade in its own right.  On the other hand, there are more filing requirements and some financial information will be in the public domain.P

What is the difference between being self-employed and a sole trader?

‘What is the difference between being self-employed and a sole trader?’ is a question that we are frequently asked.

The definition of self-employed is someone not employed and paying Income Tax through PAYE.  In other words, you are running your own business and pay your tax due through your personal tax return.

However, it also means that you are fully responsible for the success or failure of your business.

Self-employed defines the way you work not the business structure.  There are three options for this – a sole trader, business partnership or limited company – read more here

As a sole trader you own the business outright.  You and your business are seen as one blended legal and financial entity.  As such you would be personally responsible for any loan, credit agreements or unpaid bills. 

Even though a sole trader can be VAT registered and have employees, there is a perception that this is a smaller operation than a limited company. However, there is a lessened level of paperwork.

In summary, a sole trader is self-employed but you can be self-employed but not a sole trader.

Whichever is the best option for you, there are statutory requirements to register to your business before you start trading.

What is a Sole Trader?

“What is a sole trader?” is a question that we are often asked. There are three key considerations in deciding whether setting up as a sole trader is right for you:

To set up as a sole trader, you need to notify HMRC that you intend to pay Income Tax and National Insurance through a personal tax return. 

If you are not already submitting a person tax return, you will need to register and then file a tax return every year.

You can trade under your own name or you can choose a trading name for your business. 

You do not need to register your name but there are some rules.  Sole trader names must not:

You must include your name and trading name, if you have one, on official paperwork such as invoices, quotes and letters.

If you do opt for a trading name, it is advisable register your name as a trade mark to prevent anyone else using the same name.

You must register for VAT once your turnover exceeds £85,000 in a twelve-month period.   However, you can register voluntarily if it suits your business.  The consideration is who you sell to and whether they can reclaim the VAT.

If you are intending to work in construction industry as a subcontractor or contractor, you will also need to register with HMRC for the Construction Industry Scheme.

Although you are self-employed, your business can have employees paid under PAYE and can register with HMRC for this as and when needed.

Tax relief available to employees working from home

You are eligible for working from home tax relief if your employer requires that you work from home on a regular basis. This applies to both part time or full time home working scenarios. You may calculate your expenses based on the additional costs you incur as a result of working from home. 

However, you cannot claim tax relief if your employer has either directly reimbursed your expenses or paid you an allowance to cover them.

Many offices have been closed since the start of the 2020-21 tax year due to COVID-19. This means that millions more employees are now eligible.  You may make a claim as part of your Self-Assessment Tax Return if you are already obliged to submit one.

You can claim tax relief on:

What can I include in my working from home expenses?

You may claim the full annual allowance whether you have worked from home for the full year or only a small part of it. Theoretically this applies even if you worked from home for just one day. You just need to show that your employer requests that you do so.

The areas where you may be able to claim working from home tax relief are:

Where you claim the actual costs, you will need to be able to provide evidence to the HMRC. This will be in the form of invoices, receipts or contracts.

In addition, for the costs of equipment, you have two key considerations in determining whether it is eligible for tax relief:

For instance, if you have purchased a laptop and your employer has a policy restricting private use, this would support it was purchased for work purposes.

Do I need to submit a tax return?

Unlike many other countries, not everyone in the United Kingdom has to submit an annual personal tax return.  However, more and more people do. Have a look over the list below and keep in mind that you must submit a return if you;

At CooperFaure, we will work with you to ensure that you know your tax position as soon as is practicable after the end of the tax year. 

Are you eligible for tax relief?

You may be entitled to a tax relief that you are unaware of.  For instance, many employees will be entitled to a rebate against the costs of working from home in the 2020-21 and 2021-22 tax years.  Details of what you can claim are here (link to blog).

As of 2021 we will be sending out an online questionnaire which will guide you through the process step-by-step.

If you have a rebate due, HMRC usually makes the payment within four weeks of the submission of your tax return.

If you have tax to pay, the deadline remains 31st January irrespective of when you submit your tax return .  Early submission enables you to plan your cashflow.

If you have earned between £2,000 and £10,000 from share dividends or between £1,000 and £2,500 in any other untaxed income, such as airbnb or eBay, you need to inform HMRC here – https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Change is coming, are you ready?

From the 6th April 2023, Making Tax Digital will replace tax return submissions for all self-employed businesses and landlords with a turnover of over £10,000.

This will require five filings a year in an electronic format.  If your trading year is aligned to the tax year, your first report will be due in August 2023.

Whilst this may seem like an age away, we are implementing cost-effective solutions to get you ready for Making Tax Digital. 

How much does a UK accountant cost?

Whilst ‘how much does a UK accountant cost?’ is a seemingly simple question, in the past it has been hard to get a clear answer.

Traditionally accountants have aligned themselves with other professional services charging based on timesheets.  This would leave you with little idea of the total cost for the year until after the services were delivered. Often you would get a nasty surprise.

The great news is those time are changing.  Now you are in control. You can have certainty on the price to be paid and can pay the fee monthly.

The first decision that you need to make is whether you view accountancy services as a commodity or a value add.  There is no right or wrong answer, it is what is better for your business.

The playing field of accountancy

Accountancy can be viewed as a commodity for managing your business compliance. You want to keep the bookkeeping up-to-date and file the annual accounts and tax returns. If this is the case, the key driver should be price.

There are a number of online solutions for this. For example, CrunchThe Accountancy Partnership and Mazuma Accountants to name three.  For a sole trader or a simple owner-director Limited Company the monthly fee would be under £100.00 plus VAT.

Indeed, with the developments in automated bank feeds, machine learning in accounting software and artificial intelligence, it is likely that the cost of compliance will fall even further.

However, partnering with the right accountancy can add tremendous value to your business.

Google search “accountant” in your hometown and you will be presented with an array of firms offering accountancy services.  Notably, the vast majority are not explicit on the cost unlike their online solution counterparts.  The website is more an invitation to start a conversation with the fees to be discussed later.

How we make a difference

At CooperFaure, the COVID-19 pandemic has given the opportunity for us to re-evaluate how we work. We can now focus our time on delivering more value to our customers locally, nationally, and internationally.

The first step is to give you clarity on the price. We have three levels of service plans for a fixed monthly fee.

The second step is to demonstrate how we add value. In our opinion, this is not by reporting on what has happened, it is about providing the tools, experience and advice to guide you for the future.  

It is all about tomorrow not yesterday.  We have developed a suite of business intelligence and analysis to support you towards your destination.

Are we more expensive than our local accountant counterparts?  Likely yes, but we are giving you complete transparency with no hidden extras.

It is all too easy to have a visually attractive website with no substance behind it.  We have fifteen years as a business supporting and nurturing customers like you grow by combining traditional values and modern techniques.

It is easy to say that we are going to add value but is it measurable?

Our philosophy is that, if you partner with CooperFaure, we will deliver true insights that will add value to your business.  We offer a thirty-day free trial, do not tie you in to a long-term contract and give you the freedom to move between plans.

In other words, it is you the customer that has the ultimate say in whether we have added value.  

In summary, there is an abundance of choice. There accountants available, whether you are looking for a price-driven compliance solution, more support from a local accountant or a full added-value solution.  As we said earlier, there is no right or wrong answer, it is what best for your business.

If you would like to see how we can help you can find a list of our products and prices here.

Sole Trader, Partnership or Limited Company?

A question that we are asked all the time is, “What kind of business should I start in the UK?”. There are really three main options and the truth is each option has pros and cons. The decision should be based on what is best for you, your situation and your customers.

Here is a high level view of each of the choices available to you. Overall, our advice is to incorporate. The cost is relatively inexpensive and has the benefit of limiting your personal liability.

As a Sole Trader, you are the business. As such, you would be personally responsible for any loan, credit agreements or unpaid bills. Even though a Sole Trader can be VAT registered and have employees, there is a perception that this is a smaller operation than a Limited Company. However, there is a lessened level of paperwork.

A Partnership is where you and other people decide to work together in a business. In most cases, a Partnership is like a Sole Trader and you are collectively personally responsible for your business. The partners share the profits and each pays tax on their share.

There are other forms of Partnership that offer limited liability but the paperwork is on a similar level to a Limited Company.

A Limited Company offers you protection by limiting your liability. Any loan or credit agreements would be in the name of the company offering a degree of safety to the individual. A Limited Company is often viewed as a superior entity when coming to winning new business.

Whichever is the best option for you, there are statutory requirements to register your business before you start trading. Our Business Set-Up service will take care of these for you.