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!
Whilst there was an admission that the Loan Charge was designed to avoid (an interesting word in the context of Disguised Remuneration) protracted litigation with individuals challenging the HMRC interpretation of their tax affairs and a recognition of the difficulties that this would cause some individuals, the overall conclusion was that the Loan Charge “is the right approach to ensure fairness for the vast majority of UK taxpayers who pay the right amount of tax at the right time and draw a line under this form of tax avoidance.”
As a result, the Loan Charge will be applied to outstanding loans under Disguised Remuneration Schemes on 5th April. The HMRC have clarified what outstanding means. They state “The charge will apply to all loans made since 6 April 1999 if they are still outstanding on 5 April 2019. The charge will not arise on outstanding loans if the user has agreed or is progressing towards settlement with HMRC before 5 April 2019.”
It is not too late to start this process with HMRC by contacting them by email at cl.resolution@hmrc.gsi.gov.uk. The information that needs to be provided by 5th April is:
If you would like our assistance or have any questions, please contact us at tax@cooperfaure.co.uk.
Here at CooperFaure we’re always trying to think of exciting new ways of how to engage with our clients. That’s why we’ve launched a video series called ‘Making Accounting Simple’ which aims to cut through the complexity of accounting.
Making Tax Digital is the subject of our first video and it’s a really important change in accountancy. From 1st April 2019 any VAT registered business in the UK that are above the £85,000 threshold will need to submit their VAT returns from a digital platform.
If you’re already our client you don’t need to worry as we have made sure all our clients are ready for Making Tax Digital. We hope as our clients we’ve made you feel valued and informed when making your accounting decisions and if you know of anyone who could benefit from our services, especially as Making Tax Digital is only around the corner, please do let us know
Xero is our choice of digital software for Making Tax Digital with over 300,000 UK small business subscribers and over a million worldwide. Xero allows you to match incomings and outgoings automatically to accounts and bank statements as well as integrate payroll, project management and expense claim functionality. What else can it do?
• Automate calculations: Stop worrying about complicated formulas. Let Xero do the sums automatically so we can focus our time providing you with the right advice at the right time.
• View your key financials: Check your bank balances, invoices, bills and expense claims in real-time
• Bring your team together: Add as many users as you like and we can work on the same data at the same time
• Sync bank statements: Use direct banks to connect your bank account to Xero for quick and easy reconciliation
• Feel safe and secure: Rest easy, knowing that Xero provides multiple layers of data protection
If you have any questions. please contact us a tax@cooperfaure.co.uk arrange an initial consultation with one of our team of specialists. We also offer a two hour training session on Xero which includes setting up your company online. If there are any topics you would like to be covered in future videos, or in a Q+A with Jon Cooper, please let us know.
Policy objective
The government have begun the restriction on the amount of Income Tax relief landlords can get on residential property finance costs, such as mortgage interest, to the basic rate of tax. This is due to their belief that this method will make for a fairer tax system.
This will ensure that landlords with higher incomes no longer receive the most generous tax treatment. To give landlords time to adjust the government has introduced this change gradually from 6th April 2017 over 4 years.
Who is likely to be affected?
Individuals that receive rental income on residential property in the UK or elsewhere and incur finance costs (such as mortgage interest), excluding where the property meets all the criteria to be a furnished holiday letting.
General description of the measure
This measure will restrict relief for finance costs on residential properties to the basic rate of Income Tax. This will be introduced gradually from 6th April 2017.
Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.
Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.
Landlords will be able to obtain relief as follows:
If you are a landlord and are unsure how these restrictions will affect you please do not hesitate to contact us at tax@cooperfaure.co.uk
As we reach halfway through the 22nd self-assessment tax return filing season, we still find that some of the most basic questions need a bit of thought before answering. This is especially prevalent when considering the tax obligations of a company director.
How would a company director know if they need to file a self-assessment tax return?
Firstly, it is mandatory for a company director to file a tax return with the HMRC if a return notice has been issued.
Secondly, it is also mandatory for a director to notify the HMRC if they have a liability to tax for a particular year of assessment. This notice must be sent to the HMRC by 5th October following the end of the year assessment. If the HMRC are not notified the director becomes liable to penalties.
However, what if a self-assessment tax return notice has not been issued by the HMRC to a director and they do not have a tax liability?
The HMRC’s online guidance states that a director must send in a return if in the last tax year they were an active director. However, if they were the director of a non-profit organisation, such as a charity, and they did not receive any pay or benefits from being a director they will not be required to complete a tax return.
Discretion is advised however as in some case the HMRC has been known to insist that a director file a self-assessment tax return even though a return notice has not been issued and there is no further tax liability for the year, in accordance with the above guidance.
Our recommendation is for all directors to register for the filing of a self-assessment tax return as we’ve often found that our clients have been entitled to a tax rebate; either from gift aid payments, pension contributions or un-reimbursed travel expenses.
If you are a director and are unsure if you fit the criteria to file a self-assessment tax return or if you have been issued a notice by the HMRC but feel you do not fit the criteria please do not hesitate to contact us at tax@cooperfaure.co.uk
In the UK, we are in the fortunate position where most people earning a PAYE salary or wage or receiving a pension do not need to complete a tax return.
However, each year, as working and lifestyle patterns change, the number of tax returns increases. More than 11,500,000 were filed for the 2016-17 tax year.
For the 2017-18 that ran from 6th April 2017 to 5th April 2018 tax year, if any of the following apply to you, a tax return is required:
In some circumstances, you would need to submit a tax return to claim a tax rebate from HMRC. For instance, on:
If you have not completed a tax return before, for all except sole traders and partnerships, register online with HMRC at: https://online.hmrc.gov.uk/shortforms/form/SA1
For a new sole trader, register with HMRC at: https://online.hmrc.gov.uk/registration/newbusiness
For a new partner, register with HMRC at:
https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SA_iForms/1.0/SA401_20167&template=SA401_en_1.0.xdp
If you are the ‘nominated partner’, you need to register both yourself and the business partnership at:
https://online.hmrc.gov.uk/registration/newbusiness
HMRC target to post your Unique Taxpayer Reference that enables you submit a tax return within two weeks of registration.
With this you can either prepare and file a paper tax return before the deadline of 31st October 2018, enrol for the HMRC online service that grants a longer deadline of 31st January 2019 or appoint a tax advisor to act as your Agent.
To appoint CooperFaure, we would need is your Unique Tax Reference, National Insurance Number and Post Code to act on your behalf.
If you would like to arrange an initial free consultation to discuss your tax affairs or would like any further information, please email us at tax@cooperfaure.co.uk
A project may qualify for R&D tax relief if it has a result that creates a breakthrough in knowledge or competence within your field. Additionally, this may also be the case if work is carried out to resolve an uncertainty.
Developing a new product is not sufficient enough to qualify. The key is the advancement achieved to the field as a whole and not solely to your own company. Therefore, an important condition that must be met is that the answer is not already common knowledge and that it cannot easily be resolved by a professional.
It can be anything from software development to a new internal process within your company.
How to show that your project qualifies for R&D tax relief
One of the key inquiries HMRC will be questioning is, has there been a technological or scientific advancement. Therefore, it is vital to establish exactly what the research and the development you have or will carry out has achieved and not just the end product. What specific details within the project has produced an advancement?
For example, developing an app for your company will require research and development in order to produce this app. But this is not sufficient enough to qualify. However, if you develop a new feature within the app that has not been produced before it may qualify.
The next question is regarding uncertainty, and this also refers to technological and scientific uncertainties. What have you faced and overcome during the projects timeline? Uncertainty that can be resolved via brief discussions internally or resolved easily by a professional within the field does not qualify. There is a requirement to be proof that it has not been done before and cannot not be easily worked out.
The processes and procedures used throughout the project needs to be explained in detail in order for HMRC to establish if the two questions above have been answered. The language used needs to be comprehensible and not only clear for a professional within the field. Elaborate further with evidence what has been done within the filed and not solely just your own company. Be sure to include what success and failures other professionals have had to prove that the answer is not readily available. If there is not sufficient information available publicly, proof of background, experience and knowledge along with a detail explanation of your case would be required.
The project or product developed does not need to be successful in order to receive R&D tax relief. This is because the focus is on the advancement made and the work carried out to resolve the uncertainties. Additionally, the uncertainty itself is not required to be worked out. So long as it can be demonstrated that the goal was a technological advance, even if the project ends in failure, it would still qualify for the relief.
The costs that qualify for R&D tax relief
The tax relief that is provided is directly linked to the costs incurred to achieve the advancement and the work required to overcome the uncertainty. For example, qualifying costs include staff costs, external staff, costs of materials and resources used, software used and prototypes etc. The key is that the costs have to be directly related to the R&D work carried out. If not 100% of the cost is used for the project then a reasonable proportion needs to allocated.
Therefore, we would recommend to keep a record of all work carried out directly related to the project and the associated costs.
To further assist you with establishing if your company is eligible for R&D tax relief, answer our 6 simple questions.
If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.
It is a win-win situation for the Company and the Investor!
The Enterprise Investment Scheme (EIS) has been made available by the government to help small to medium sized companies grow by acquiring investments. It is one of four schemes available and it provides tax relief for investors who purchase shares. Therefore, it acts as an incentive for individuals to invest into small to medium sized companies and in turn assisting the government’s goal of growth. It is a win-win situation for both parties.
If you are a company looking for investment through EIS you can raise up to £5 million per year and £12 million maximum in the company’s lifetime. There are certain legal requirements that the company must meet and these are outlined in the Income Tax Act 2007. Additionally, under the new rules the company must show evidence of long term growth and outline the high risk of potential capital loss. Overall, it is vital that the company and investors complies with the scheme’s rules for 3 years in order for the investors to receive and keep the tax relief. It is important to note that it is not solely a commitment at the point of investment but must be adhered by for 3 years.
HMRC enables companies to apply for Advanced Assurance before shares are issued. This can aid the company to receive investment as it provides investors with assurance whether the company will be eligible for EIS. Please note that HMRC no longer provide advanced assurance on applications entailing speculative investors. Therefore, potential investors must be detailed in the application and the process cannot be commenced without the company having an idea of whom their investors will be.
We at CooperFaure can assist in compiling all of the following which is required for an Advanced Assurance Application:
If the company is not going to apply for Advanced Assurance the full list stated above is required to be submitted alongside the Compliance Statement (EIS1 form). Once it has been reviewed by HMRC’s Small Companies Enterprise Centre (SCEC) it will either be refused or approved. If the Compliance Statement is approved SCEC will send the company two forms EIS2 and EIS3. EIS2 states that the company is authorised to issue certificates that they are a qualifying company. EIS3 are blank forms that the company is required to fill in and send to the individual investors as a certificate. These certificates enable the investors to receive tax relief. Without proof of EIS3 the investor will not be able to claim tax relief.
A company must not submit the Compliance Statement until at least 4 months of the specific trade or research and development has been carried out for which the money is raised. Additionally, it has to be submitted before 2 years has passed from the end of the specific tax year that the shares were issued or two years after the end of the period of four months referred to above.
In order for the investor to make a claim they need to have an EIS3 certificate as stated above, ensure that they meet all of the conditions and that the claim is made within 5 years after the 31 January following the tax year in which the shares were issued.
The investor cannot have any connection with the company in order to qualify for tax relief. The following are examples of people who will not qualify due to this reason:
All of the conditions above apply for 5 years and this period is for 2 years before and 3 years after the latest of date the shares were issued or date of start of trade.
Additionally, as well as the examples provided above the 30% rules apply for an associate and therefore will not qualify as an investor. An associate can be anyone of the following:
For shares distributed at incorporation and before trade has commenced or more shares are issued the 30% rule does not apply.
Siblings are not seen as associates of the company and can therefore qualify as an investor as long as all the other conditions mentioned above are met.
If the investor receives any value for example in terms of a loan or shares are repurchased during the 5-year period the relief received from EIS must be withdrawn or reduced.
For further details how to take your business to the next level please read our previous newsletter.
We at CooperFaure believe that EIS is a great scheme for most companies to attract investors in order to grow their company. We have assisted numerous clients with the EIS process and have found that as long as all the information is correctly provided to SCEC and all conditions are met there is no reason for the company not to be eligible for EIS.
If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.
Answer our 6 simple questions to help you establish if your company is eligible for R&D Tax Relief:
Please click here for the questions.
If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.
Disguised Remuneration
This newsletter will outline the new law that has been brought in by the government and your best steps of actions to avoid the loan charge.
What is a Disguised Remuneration Scheme?
A DR scheme is a scheme used by employers, employees and self-employed claimed to avoid paying the standard rates of Income Tax and National Insurance Contribution that they would normally pay on remuneration. Normally, the larger proportion of the remuneration is made up of a loan from a third party with no intention for the loaned amount to be repaid.
In July 2017 Rangers Football Club was found guilty of using a disguised remuneration tax avoidance scheme. The Supreme Court stated ‘that employment income paid from an employer to a third party is still taxable as employment income’ (HMRC, 2017).
The Loan Charge
In the Budget 2016, the new Loan Charge was announced and will apply for any loans made through a disguised remuneration tax avoidance scheme on or after 6th April 1999 and still outstanding on 5th April 2019. The charge arises on 5th April 2019 and this date is important as it is the last date of the 2018-19 tax year.
How the Loan Charge will work?
Contractors will be required to pay Income Tax on the total of all outstanding loans as if this was all income received in the 2018-19 tax year.
Self-employed and people who have used partnership schemes will also be liable to pay Class 4 National Insurance Contribution as well as the Income Tax mentioned above.
Any loan received in 2013-2014 and onwards will also include late payment interest.
Depending on the individual’s personal circumstance other tax liabilities may also apply, for example penalties and Inheritance Tax.
A Final Settlement Opportunity
HMRC are advising anyone who has been part of a DR scheme and still have outstanding loans to settle these prior to 5th April 2019 to avoid the Loan Charge. The tax due would almost certainly be lower as the loans will be treated income in the individual tax years that they were paid. In addition, the tax would be based on the net amount received.
There is more flexibility for payment terms to be extended through a contractual agreement before the loan charge comes into place. Additionally, payment arrangements are available if you struggle to pay the settlement amount. If you choose not to settle; the terms may no longer be available and you may face extra costs. Finally, settling will provide you with a peace of mind and more certainty.
If the loans made under a DR scheme were treated as a taxable benefit and this benefit was included in the personal P11D some Income Tax would have been paid. However, this is a relatively small amount compared to the Income tax due on the loan itself, but some tax has been paid nonetheless. Therefore, the overall amount due will be reduced by this amount.
There is a four-year window for this. As a result, only the years from 2013-14 onwards are open to amend the tax return in this way.
Additionally, if any Accelerated Payment Notices (advanced payments) relating to the DR schemes have been paid, the full amount is netted against the overall Income Tax due for the schemes and tax years against which they were issued.
How to Make Sure you Settle in time?
You have to register with HMRC before or on 31st May 2018 and then all of the requested information must be sent to HMRC by 30th September 2018.
To summaries, if you have any outstanding loans from a DR Scheme or you believe that you may have been part of a DR Scheme we strongly recommend for you to take action now.
If you are unsure if this applies to you or if you would like assistance with settling please do not hesitate to contact us. If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.
This question, if you should be a Sole Trader or set up a Limited Company is a frequent query that we get asked. The answer is dependent upon your individual circumstances, but there are advantages and disadvantages of both that can help you make your decision.
This newsletter will take you through these to aid you with your decision making.
Advantages of being a Limited Company
A Limited Company offers the individual protection by limiting their liability as the Company is a separate legal identity from the owners. Any loan or credit agreements would be in the name of the Company offering a degree of safety to the individual. Therefore, the shareholders normally have no personal liability beyond the amount paid for their shares.
A Limited Company often appears more professional, more established, and both consumers and creditors know that it is legally registered and regulated. Therefore, there is a perception that a Limited Company is more trustworthy than a Sole Trader which may assist in winning new business.
Additionally, it is usually much easier and more likely to sell a Limited Company than a Sole trade business. For a Limited Company there is also an opportunity to raise funds by issuing shares.
Disadvantages of being a Limited Company
There are statutory requirements in and around operating a Limited Company that inevitably means paperwork. Therefore, administrative expenses will be higher than a Sole Trader to ensure compliance with formalities of Company law, such as preparation of board minutes and shareholder resolutions. As well as dealing with the extra returns and administration relating to running a Company. Due to this, professional accountancy services are normally required to assist with the preparation and filing of accounts and tax returns.
A Limited Company provides less privacy than a Sole Trader. Certain business information must be filed at Companies House and as a result they are available for inspection by members of the public, for example the Company’s Annual Accounts.
Advantages of being a Sole Trader
Sole Traders have fairly simple accounts and are required to submit an individual self-assessment tax return annually, possibly along with any other VAT and payroll returns depending on their circumstances.
Professional accountancy advice is normally required to prepare business accounts, tax returns and administration around VAT and payroll. However, there is less complexity compared to Limited companies, which can result in reduced administration costs.
Finally, there is no requirements to make information public and the business can generally be run in the matter in which the proprietor/owner wishes.
Disadvantages of being a Sole Trader
As a Sole Trader, the individual is the business and has unlimited liability, as such, would be personally responsible for any loan or credit agreements. This means the owner’s personal assets are at risk. When first trading the business may be small and consequently there may be lower exposure to cost and risk, but as the business grows the trade naturally becomes larger and riskier. Hence, it is usually much better from a risk perspective to trade through a Limited Company. This is one of the main issues to be considered when deciding on the structure of a new Company formation.
Additionally, the credit rating of the owner can affect the business’ credit rating. Therefore, it can be hard to raise funds when trading as a Sole Trader. Additionally, the business may appear less established compared to a Limited Company. This in turn, may impact on the owner’s ability to sell the business. Potential acquirers often perceive unincorporated businesses to have a lower value when compared to a Limited Company. Therefore, when selling the business, you may receive less than if it was a Limited Company.
Tax burden to be Considered
In most cases, the tax burden is relatively high for a Sole Trader compared to trading as a Limited Company.
As a Sole Trader you pay 20% – 45% income tax on the taxable profit, whereas for a Limited Company you will be subject to Corporation tax of 19% on the taxable profit (2018). This will be reduced further to 17% in 2020.
Additionally, as a director of a Limited Company you are entitled to an amount of tax-free allowance for dividend per tax year. This amount is currently £5000.00 for the tax year 2017-2018. However, this is going to be reduced to £2000.00 from 2018-2019 tax year.
You are also able to reclaim quite a substantial proportion of the expenses you are likely to incur for the Company and these expenses are allowable against Corporation Tax.
If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.
Welcome to the new era of accounting, it is no longer dull, boring and time consuming. Traditional accounting has been transformed into an innovative, modern and networking platform for businesses.
The government’s push to make tax digital by 2020 goes hand in hand with the cloud based accounting world that is emerging around us.
It is now possible to access your business accounts in the cloud from anywhere at any time. Social pressures and expectations are higher than ever. With the help of a cloud based accounting system you can travel the world, meet new people, be there for your family and friends and at the same time keep on top of your business from any device.
Making the choice to switch your accounts to a cloud based system will ensure that you are keeping up to date with the current generation’s expectation for information to be accessible at the click of a button.
We at CooperFaure are certified advisors and Gold Partners with the cloud based accounting software Xero.
Xero has more than 862,000 users worldwide and our clients are reaping the benefits:
Get more time to innovate with total visibility of your accounts, including cashflow, invoicing and online payments.
www.xero.com
Do you want to join the new exciting world of Xero?
Email us at welcome@cooperfaure.co.uk and let us show you real-time accounting.