In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.
There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.
Key extracts from HMRC guidance include:
You must file your VAT return using functional compatible software
Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:
- record and store digital records.
- provide HMRC with information and VAT returns from the data held in those digital records.
- receive information from HMRC.
You must keep records digitally
You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:
- your business name, address and VAT registration number.
- any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
- the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
- the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
- any adjustments you make to a return.
- the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
- the rate of VAT you charged on goods and services.
- your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
- copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.
All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.
Our team at Kirkwood Wilson are here to support you with your digital accounting, and help you prepare with the latest compliance. If you would like to learn more please contact us for simple and straightforward business advice.
With the cost-of-living crisis really beginning to bite, an increase to NI rates may leave a bitter taste in the mouth of both employers and employees. Today, we’ll break down those increases and show you the little bit of light at the end of the tunnel with the increases.
You may remember that back in November 2021, Rishi Sunak announced that NI rates would be rising across the board by 1.25%. The change would affect both employees and employers, seeing the former rise to 13.25% for basic rate taxpayers and to 3.25% on any earnings over £50,270. Employer’s NI would rise to 15.15%. The tax hike is being labelled as a Health and Social Care Levy and is designed to benefit the NHS.
National Insurance, what you need to know as an employee
For an employee earning £25,000, the cost to the employer for 22/23 will increase by £198.75. HMRC has tried to alleviate some of this additional increase by increasing the employment allowance from £4,000 to £5,000 for the 22/23 year. The £1,000 increase to the employment allowance will alleviate some of the pain felt by employers in the face of this increase, although for many businesses it will still ultimately mean they are worse off when coming to payroll.
For employees, with an NI increase to 13.25% (again assuming a salary of £25,000 with a standard tax code and no deductions) an employee would be taking home around £150 per year less than they were in the previous tax year.
Back in March 2022, at an emergency budget aimed at tackling the huge rise in costs facing consumers, Rishi Sunak further announced that the threshold at which employees would begin paying NI would rise in line with the personal allowance to £12,570.
As a result in our example above, the employee would actually be earning somewhere in the region of £205 more than in the last tax year. It’s nothing major, but some help all the same.
National Insurance impact on shareholders
We also shouldn’t forget the impact on shareholders receiving dividends in this new tax year. Dividend rates have historically been:
- 0% on the first £2,000
- 7.5% on a dividend taxed at basic rate
- 32.5% on a dividend taxed at the higher rate
- 38.1% on dividends taxed at the additional rate.
Aside from the first £2,000, each tax bracket will see an increase of 1.25% to its tax rate. The impact of this would be an uplift of £12.50 of tax on every £1,000 of dividend voted.
If the increase to NI rates is giving you cause for concern or you’ve any questions or need business advice on any of these topics please get in touch with one of our very helpful team members at the office on 01704 546000.
By now, you’re probably no stranger to the term ‘Crypto’, but what exactly is Crypto-currency and how does it interact with the UK tax system? Today, Craig will break down some of these questions and hopefully put your mind at ease as to how you might be looking after your portfolio.
What is Crypto-currency?
According to the Oxford dictionary, Crypto-currency is “a digital currency in which transactions are verified and records maintained by a decentralised system using cryptography, rather than by a centralised authority”.
You may have heard of currencies such as Bitcoin and Ethereum, which make up over 50% of the Crypto market. However, the overall market is flooded with new and emerging coins which people are investing in all the time.
How is Crypto-currency taxed?
Cryptocurrencies are seen by HMRC as an asset and any gains in the value of a currency are therefore taxed under Capital Gains Tax rules. Where an investor needs to take particular care is when disposing of a currency. Each sale is classed as disposal even in the case where the currency is being traded for another. If you are a business currently using Crypto-currency discover how our business advice can help.
Many people are under the impression that the chargeable event occurs when the funds from the sale are moved across to a bank account, although this as mentioned above this is not the case. It’s also very important to note that the investor will need to take steps to ensure they are in control of records that show when purchases and sales were made in order to calculate any potential gain.
How to report crypto currency on tax return?
At the time of writing, the crypto market is seeing something of a crash. It’s worth remembering that gains are calculated based on the sales price at the time less what you initially paid for the currency and any associated selling costs. You may have seen a drop in the price of your coin, however, a gain may still be present as the selling price may be higher than the price you paid.
In a very small amount of cases, HMRC may deem an investor as a trader instead. This is only likely to be happy where the volume of transactions is significant (potentially upwards of 10,000 trades per year).
The Crypto market is fast moving and is always evolving as more and more people jump onboard. We’ll keep you up to date with any changes on Crypto currencies, but should you have any further questions please get in contact with our team on 01704 546000.
Kirkwood Wilson recently saw the return of their well loved Charity Golf Day! With Covid keeping this annual festivity on hold for the last couple of years the team finally made their way back to the green with old and new faces.
Our Golf Charity Day was a hit!
Held at Formby Ladies Golf Club the sun was shining and it might have been our most successful golf day by “Par”. We are so proud to have such generous clients for donating wonderful raffle prizes and being amazing sports!
All our players definitely did swing to success, but our winners were team Aerocool! They have been in hot pursuit of the trophy for a few years, and in the past narrowly missed out a couple of times. So, big congratulations to them!
We are currently collating the total amount raised during this year’s events – keep an eye on our social media to stay up to date with all things Kirkwood Wilson.
Learn about our chosen charity: MS Society
This year our Charity Golf Day was in aid of the MS Society. The MS Society fund world-leading research, and work to distribute information and campaign for awareness and rights for those with or experiencing the effects of MS whether family or friend.
They are such a worthy cause offering support, revolutionary research, and most importantly an ear to listen in a time of need.
What is MS?
Multiple sclerosis (MS) is a neurological condition – that means it affects your nerves. You get it when your immune system isn’t working properly leading to a range of issues from motor skills to vision. More than 130,000 people in the UK have MS and we are so proud to be contributing to such an amazing charity that helps to support after diagnosis.
This month we saw Earth day go from strength to strength and become one of the largest environmental movement, with over 1 billion people and more than 75,000 partners involved each year across almost 200 countries.
So what can WE do to help be an eco-friendly business? Here are our top tips to help your business move towards net-zero carbon. Not only are there environmental benefits, but there are also financial and accounting benefits too!
Businesses need to lead the way in moving towards net-zero carbon emissions. There is no quick fix so businesses need to start the journey now and move towards the ultimate goal of net-zero, over the next few years. Here are some of the changes that you can implement in your firm.
How to be environmentally friendly
- Switch to a green energy supplier
- Switch to electric vehicles
- Reduce business travel
- Focus on reducing waste
- Switch to lower carbon suppliers
Switch to a green energy supplier.
Green energy is generated by renewable sources such as wind, hydroelectric or solar. The more businesses that switch to green energy suppliers the quicker the shift away from fossil fuels such as coal or oil will be.
Switch to electric vehicles.
If your business has a fleet of petrol or diesel vehicles, you could switch across to electric-only vehicles, this will naturally make you that much more of an eco-friendly business. It is also worth noting that company car drivers who choose an electric vehicle also enjoy a reduced benefit-in-kind, for tax purposes. If you deliver products or services to your customers, showing up in an electric vehicle sends a positive message that your firm is an environmentally responsible business.
Reduce business travel.
Reducing business travel will help to reduce your carbon footprint. Air travel is responsible for significant carbon emissions so really challenge yourselves on whether meeting objectives can be met via Zoom or Teams. Commuting also contributes to carbon emissions. Encouraging your staff to work from home, some of the time will help to reduce your carbon emissions. Face-to-face meetings are still very important but it is key to get the balance right.
Focus on reducing waste.
Wasted paper, water, energy, or raw materials contribute to climate change and also cost money.
You can reduce your energy bills by ensuring that all equipment is turned off at night.
You can also invest in improved insulation and thermal management of your business premises in order to reduce the amount of central heating that is required, particularly in the winter months. You can also encourage staff to print less and reuse or recycle materials, where possible. Embracing new technology such as electronic signatures, etc. can further reduce your reliance on paper.
Switch to lower carbon suppliers.
Research low carbon suppliers and where possible, switch to using them instead of your traditional suppliers. Even small changes such as using a local supplier rather than an overseas firm will help to reduce the carbon footprint of transporting materials to your business premises. If you only buy from other businesses that are taking action on climate change, you will help to further drive the business community towards our shared goal of net-zero carbon. Examples could include banks that offer paperless statements, logistics companies that use electric vans, or food companies that recycle and use minimal packaging.
What is my carbon footprint?
Curious about the carbon footprint of your business? There are a variety of information sources that can help you see your impact and potentially help transform you into an eco-friendly business. Head to the government carbon calculator.
Can you believe we’re almost at the end of another tax year?! It certainly doesn’t feel like twelve months ago that we were preparing for the changes that came into effect for the 21/22 tax year.
As always, we think March is a really important month to sit down and make sure you’re maximising any of those tax allowances that might be relevant to your own individual tax position. Below are our top suggestions for ways to reduce your tax liability for the 21/22 tax year.
You may be aware that you receive an annual allowance of up to £40,000 per year for pension contributions if your Limited Company makes contributions for you. Making a contribution will not only utilise any available allowances but will also attract tax relief from a Corporation Tax perspective in your Limited Company.
If you make personal pension contributions before 5 April 2022, you will reduce your relevant earnings for income tax purposes. This is particularly pertinent for people earning between £100,000 and £125,140 as it could mean the reinstatement of some of your personal allowance.
We would always recommend that you have a conversation with your Financial Adviser over anything concerning pensions.
Capital Gains Tax
Each person is entitled to £12,300 of tax free Capital Gains every tax year. It’s therefore recommended if you are likely to incur a capital gain in the near future, that you realise that gain prior to 5 April 2022 as you will lose that year’s exemption after that date. It’s also worth considering that your spouse may also have unutilised allowances, which could double the impact of any tax saved by crystallising gains this tax year.
Planning for Remuneration
You may be aware that from 6 April 2022, there is to be an increase to national insurance and dividend tax rates of 1.25%. Whilst the impact is not huge (an additional £10,000 dividend after 6 April would incur £125 in extra personal tax when compared with 21/22), any additional income declared prior to 6 April would ultimately save at least some tax.
Anyone who owns shares in a company is entitled to £2,000 of tax free dividends each year. If you’ve not already been voted a dividend in the tax year to date, it’s worth considering voting a dividend before 5 April 22. A £2,000 dividend would save £150 of tax.
Capital Allowances for Sole Traders
If you’re looking to reduce your sole trade profits in the tax year, you might want to consider replacing your van or some plant and machinery you hold in your business. The rate of the capital allowance depends upon the category of expenditure, however, in most instances you will see some amendments to your taxable profits by making a capital purchase. Our specialist business advice team will be able to help you plan for the future of your business.
We really hope that the above has given you something to think about ahead of the end of the tax year.
Some of the questions we are most frequently asked nowadays are around the subject of shareholders’ agreements so we thought today we’d share with you a little bit of our knowledge and thoughts.
What are shareholders funds?
Company Law states shareholders who:
- Own more than 50% can pass a motion at a company meeting regardless of the views of other shareholders
- If that shareholder(s) owns more than 75% of the shares they control the company outright and can veto the decisions of all other shareholders.
This may not suit all business situations, especially where you have two or more founders holding equal share capital or a group of owners with varying amounts of capital, some of whom are directors and some who are not, but who are all working together for the company’s success.
A shareholders’ agreement is entered into between all or some of the shareholders in a company. It governs the relationship between the shareholders, the management of the company, ownership of the shares and the protection of the shareholders. They also help dictate the way in which the company is run.
What is a shareholders agreement?
A shareholders’ agreement can help define how a business makes decisions to the benefit of all owners and is recommended where:
- A small number of owners want to reach collective and fair decisions for the benefit of all
- Some owners may want to be able to influence decisions that are particularly relevant to them
- Some shareholders may not be directors and cannot influence operations on a day-to-day basis
Typically it is seeking to deal with the three “D’s” of death, disability, and disagreement. It also regularly helps advise over the retirement of a director or the buying back of shares.
Key areas for any shareholder agreement
This is not a comprehensive list as each situation is different, but it may help you collect the thoughts of all shareholders before you draw up an agreement.
- Company details including structure, directors, and officers
- Purpose and aims of the company
- Equity split of shareholders
- Parties to the agreement
- Shareholders rights, obligations and commitments
- Decision making processes on major issues required voting majorities and day to day operating decisions
- Restrictions on the sale of shares
- Rights of first refusal and pre-emptive rights to acquire shares on leaving, retirement, death, or disability
- Death, disability, and other retirement compensation payments
- Management contracts, director approval, and remuneration amounts
- Insurance and other protective requirements
- Professional advisers and change of professional advisers
- Dispute resolution
- Changes to and termination of the agreement
- Buy out provisions for leaving shareholders
- Valuation of shares on changes and valuations of the business
Over the years many clients have strayed away from an agreement due to the perceived expense of setting the proposal up in the first instance. Our view is that a shareholders’ agreement is an essential document for any limited company and an equitably drafted agreement should provide comfort to all parties to the agreement. We have seen many instances in the past where specific scenarios would have been much better dealt with given the intervention of an agreement and in our opinion the benefits far outweigh the costs.
There really is no bad time to set up a shareholders’ agreement, so please get in touch if you need help in planning for an agreement, especially where there are several shareholders, a new company is being formed, a shareholder wants to sell their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder.
We will be happy to assist with share and company valuations and putting the shareholders wishes into an agreement with our local, recommended solicitor.
Need some expert advice, contact us today!
Whilst the COVID pandemic caused major operational issues for many businesses, its effect on the business world led to many furloughed employees looking to ‘side hustles’ as a way to generate extra income for themselves and their families.
What is a side hustle?
The term side hustle is relatively new and is defined by the Cambridge Dictionary as a piece of work or a job that you get paid for doing in addition to your main job. For many, this extra income has helped alleviate financial strain throughout the pandemic. For others, it was the start of a fledgling business, often being run on an e-commerce platform such as Amazon or Etsy.
When would I need to pay VAT on my side hustle?
You’ll only really be required to account for VAT on your sales when you reach the compulsory VAT registration threshold of £85,000. Some businesses choose to register for VAT at lower levels of turnover as it sets them up for any period of growth in the future.
Although not always the case, e-commerce sales will generally be between a business and an individual consumer. One thing we’ve always recommended where this is true is that the business sets their pricing structure up from the beginning to account for any monies they’ll lose in VAT when they do eventually reach the VAT threshold.
As a worked example, if a business sells a product for £30 and it is VAT registered, then it will have sales of £25 and will account for £5 of sales VAT each time it makes a sale. The business effectively collects the £5 of VAT on behalf of the consumer and pays it over to HMRC, usually at the end of each quarter.
The VAT rules on sales made in the UK are relatively straightforward. Where things become a little more complicated are when sales are exported from the UK to other countries. Post-Brexit rules mean that you are able to zero-rate (ie charge no VAT) most sales, as long as you keep evidence that the goods were actually exported from UK shores.
Get side hustle accounting advice you can trust
If you’re thinking of selling on Amazon or any of the other e-commerce platforms, please do not hesitate to get in touch and we’ll be happy to help you get set up in the right manner. Feel free to contact our friendly team on 01704 546000.
If you’ve already sent us your information and we have submitted your return to HMRC, thank you! You don’t need to do anything else other than pay any amount due.
If you have not sent us your information (because of Coronavirus) HMRC are now waiving late filing and late payment penalties for one month – giving you extra time, if you need it, to send your information to us so we can complete your tax return and submit it to them.
You will not receive a late filing penalty as long as your tax return is filed online by 28 February. Interest will be charged from 1 February on any outstanding liabilities you have not paid. You will not be charged a 5% late payment penalty if you pay your tax or make a Time to Pay arrangement by 1 April.
If you can’t pay in full by 31 January because of financial difficulties, HMRC may be able to help by arranging a payment plan. Payment plans or payments in full must be in place by midnight on 1 April to avoid a late payment penalty. If you owe less than £30,000, you may be able to do this online without speaking to them. Go to GOV .UK and search ‘HMRC
Get in Touch
If you need help with submitting your tax return please do not hesitate to get in touch on 01704546000 or email us at firstname.lastname@example.org.
Making Tax Digital for VAT becomes mandatory for all VAT registered businesses from 1 April 2022
Businesses with a taxable turnover above £85,000 have already been required to follow Making Tax Digital, keeping digital records and filing VAT returns using compatible software since April 2019.
From 1 April 2022, all VAT registered businesses must file digitally through Making Tax Digital from 1 April 2022, regardless of turnover.
We can sign you up to MTD, although you will be responsible for meeting your VAT obligations. Those who do not join Making Tax Digital for VAT may be charged a penalty for failure to do so.
If your business has not signed up to MTD compatible bookkeeping software then please talk to us urgently about how we can help your business comply with the new law.
Get in touch
The team at Kirkwood Wilson are always happy to provide advice and assist with changes like Making Tax Digital. To find out how we can help your business get in touch on 01704546000 or email us at email@example.com.