Emma Stevens

HMRC Basis Period Reforms for the Self-Employed and Partnerships

26/01/2024 By Emma Stevens

For clients who submit ‘self-employed’ or ‘partnership’ tax returns, HMRC will be bringing in ‘Basis Period Reforms’ affecting those whose accounting period does not end on the 31st of March or April the 5th.

The changes will mean that everyone who is registered as self-employed or as a partnership will effectively have to change their year-end to the 31st of March (or the 5th of April) in order to align with HMRC’s tax year.

The period in which this will need to be done starts from the 2023/24 tax year and is likely to lead to higher tax burdens during this period, for those who need to extend their accounts in order to fit this new basis period.

Photo of a UK self-employment tax form, the deadline for the tax year is 5th April as shown by the calendar.

To help reduce this additional burden, ‘overlap profits’ -which would have been created when these businesses started submitting their first tax returns- can be relieved against the extended accounts. Added to this, there will also be the option of paying the additional tax on any additional/’transitional’ profit to HMRC over 5 years.

For those affected by this change, we will be providing additional advice over the next year on this issue and also trying to track down/calculate your ‘overlap profit’ figures if you started out with a different accountant to ourselves.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Did you know?…… Use of home as office

08/12/2017 By Emma Stevens

As a limited company director, you can claim money from the company for use of home as office. You, personally, will not need to pay tax on this money and the company can claim tax relief for paying it.

You can claim for things to do with your work e.g. business telephone calls or the extra cost of gas and electricity for your work area. You can’t claim for things you use for both private and business use such as rent or broadband access.

You do not need to provide evidence for claims of up to £4 a week (£18 a month). For claims over this amount you will need to provide evidence of what you spent and how you calculated the proportion charged to the company.

For more details on use of home as office and other tax savings you can make contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Did you know? …. Marriage Allowance

09/11/2017 By Emma Stevens

Marriage allowance allows you to transfer £1,150 of your personal allowance to your husband, wife or civil partner, reducing their tax by £230.

Who will benefit? If you earn less than £11,500 a year and your partner earns between £11,501 and £45,000 you could be better off by applying for marriage allowance. You need to be married or in a civil partnership to apply.

You can apply for the marriage allowance online via www.gov.uk/apply-marriage-allowance If successful the change will be backdated to the beginning of the tax year (6 April) and the change will be reflected in your tax code.

If you complete a tax return you can opt for marriage allowance for 2016/17 via your personal tax return which is due for filing by 31^st January 2018.

If your circumstances change you, such as your partner earning more than £45,000 or you earning more than £11,500 then you can apply to cancel your marriage allowance online.

If you need any advice on tax please get in touch with Emma Stevens at Emma Stevens Accountancy.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Self Assessment Tax Return

14/08/2017 By Emma Stevens

A Self-assessment tax return is the form an individual completes to report to HMRC their income for the year and to calculate how much tax is due on that income. In the UK, the tax year runs from 6^th April to 5^th April the following year. So, for 2016-17 the period covered is 6^th April 2016 to 5^th April 2017. Not all UK residents are required to do a tax return. If your only income is as an employee you don’t need to worry about it. However, there are some situations which do require the completion of a return and this article should guide you through them.

Do I need to do one?

You are required to complete a Self-assessment tax return if you come under the following categories:

· Self employed.

· Have untaxed income such as rental income exceeding £2,500

· Your income from shares, savings or investments exceeds £10,000

· You’re a company director

· You made a chargeable gain such as selling a 2^nd home

· Your income is over £100,000 (or £50,000 and you/your partner claims child benefit)

· You have income from abroad or you live abroad and have UK income

What do I need to do?

If you fall into one of the above categories you must complete a tax return each year by 31 January. So, for tax year ending 5 Apr 2017, your tax return must be completed and sent to HMRC, online, by 31^st January 2018 (paper versions must be filed by 31^st October).

You need to include all your income on your tax return, not just the income which hasn’t been taxed

When do I pay

HMRC must be paid the balance of tax due by 31^st January following the end of the tax year (31^st January 2018 for the tax year ending 5 April 2017).

If you owe under £3,000 in tax and pay tax through the PAYE scheme you can ask HMRC to collect the tax owed through your pay code, as long as you submit your tax return by 31^st December following the end of the tax year. HMRC will only apply this if you have enough PAYE income for it to be collected.

You will be required to make a payment on account towards your tax bill for the following year if your self-assessment bill is more than £1,000. Each payment on account is half your previous year’s tax bill. These payments are due on 31^st January and 31^st July. If you still have tax to pay after you’ve made your payments on account this balancing payment is also due by 31^st January.

I need to do a tax return how do I tell HMRC

How you register depends on the reason you are registering. If you are registering because you are self-employed you need to complete the form CWF1 online. If you’re not self-employed you need to complete the form SA1. You must register by 5^th October if you need to complete a tax return for the last tax year (5^th October 2017 for the tax year ending 5^th April 2017).

How can an accountant help me?

An accountant can help you in many ways with your tax return. Firstly, they will save you the time and hassle of doing it yourself. A good accountant will also know what you can and can’t claim against your taxable income and they will advise you accordingly. An accountant will register as your agent and can speak to HMRC on your behalf, saving you hours of waiting on hold if you have a problem! To find out more contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

My company is VAT registered – what do I need to do now?

29/05/2017 By Emma Stevens

If you’ve made the decision to become VAT registered, there are a few changes that you’ll have to start making straight away to the way you run your business. The obvious one is that you’ll need to add an extra 20% to the price of your goods or services.

There are exemptions to this rule like food, books, newspapers and magazines, young children’s clothing and footwear which don’t attract VAT, so if you also sell any of those products, you won’t add anything to the price.

You need to start charging VAT from the day you register for VAT, too. Don’t wait for the certificate to arrive as this can take some time, and you’ll have a shortfall in what you pay and what you charge your customers if you wait for the certificate.

If you send out sales invoices, while you wait for your certificate, you can still add the VAT but you’ll need to show a total figure including sale amount and VAT as one amount. When you receive the certificate with your VAT number on it, you can reissue your invoice with the correct details, separating VAT from sale price, and this allows your customers to claim back the VAT they pay you.

Filing VAT Returns

Being VAT registered means extra paperwork. Every quarter you’ll have to complete a VAT return for HMRC – it can be done online these days which makes it easier. The return needs to show your ‘output’ tax, which is the total amount of VAT you’ve charged to your customers. You also include any VAT you’ve paid on things you’ve bought for your business that you want to reclaim – this could be your stock, supplies or anything business related. This is called ‘input’ tax.

Your quarterly return needs include all income invoices you’ve raised during the quarter, not just the money you’ve actually received. HMRC then tells you whether you need to pay them any VAT, based on whether your inputs are more than your outputs.

The Cash Accounting Scheme

If you don’t want to pay your VAT until you’ve been paid for your goods or services, you might qualify for the cash accounting scheme. You can only use this scheme if your annual turnover is less than £1.35 million.

The scheme is similar to standard VAT returns, except that you won’t claim or reclaim the VAT on unpaid invoices. If you invoice a customer in March but you aren’t paid until May, that business is included in a later tax return, not the return you would file at the end of the March quarter

The benefit of using the cash accounting scheme is mainly that it makes your business cash flow a little easier. You’ll only have to pay HMRC their VAT once you’ve actually received it from your customers, so you won’t have to find large amounts on unpaid bills.

You will, of course, not be able to claim anything back on your purchases until it’s paid. If you decide to leave the scheme, you won’t be able to do so until you’ve paid any outstanding VAT to HMRC.

For advice on VAT and other accounting issues, contact Emma at Emma Stevens Accountancy for a friendly chat.

Expenses and employee benefits – how are they taxed and what do I need to do?

22/05/2017 By Emma Stevens

If you pay any expenses or offer employee benefits to your staff members, you must make sure that they are properly declared to HMRC and the right tax is paid on them. Many types of employee perks are taxable and if you don’t submit the right paperwork on time, you could end up with a hefty fine.

Some of the benefits and expenses that are included are:

Travel expenses
Entertainment expenses
Childcare costs
Company cars
Employee health insurance

Reporting and paying

Depending on the type of benefits or expenses you give your employees, different rules apply for reporting them and paying tax on them.

Normally, you’ll submit a form to HMRC for every employee you’ve given expenses or benefits. The form is called a called a P11D and has to be submitted at the end of every tax year.

There’s a further form called a P11D (b) and this needs to be completed if:

you’ve submitted P11D forms for any employees
you’ve paid any of your employees’ expenses through your payroll
you’ve been sent a P11D(b) form by HMRC

The P11D(b) just tells HMRC how much Class 1A National Insurance you must pay on the benefits and expenses you’ve given. You can let HMRC know that you don’t owe any Class 1A National Insurance by completing a declaration.

How to pay tax through the payroll

If you register with HMRC before 6th April it’s possible to deduct any tax on most employee benefits and expenses though the payroll. If you do this, and you pay tax on all of their benefits and expenses directly via payroll, you won’t have to fill in the P11D form. You’ll still have to complete and submit the P11D (b) to pay the Class 1A National Insurance.

What you need to report

Different types of expenses and employee benefits are all reported differently, and there’s an A-Z of different benefits available on the GOV.UK website which will help you choose the right way to report and pay it. https://www.gov.uk/expenses-and-benefits-a-to-z

For ‘minor’ expenses or employee benefits, you could be able make a one-off payment called a PAYE Settlement Agreement.

You can normally report using:

commercial payroll software
HMRC’s PAYE Online service
HMRC’s Online End of Year Expenses and Benefits service

You can also download and fill in forms P11D and P11D (b) and send them to HMRC.

Be careful: If you’re late filing the information you could get a penalty of £100 per 50 employees for each month or part month your P11D (b) is late.

There are also penalties and interest if you’re late paying.

For deadlines – go to: https://www.gov.uk/employer-reporting-expenses-benefits/deadlines

Keeping accurate records

It’s very important to make sure that you keep accurate records of everything you give your employees by way of expenses and benefits. You must be able to prove to HMRC that your reports are accurate and that your end of year forms have been properly completed. Sometimes HMRC ask to see evidence of this, too.

Things you’ll need to make a record of include:

dates and details of every expense or benefit you’ve given
information about how you worked out the amounts to put on your end-of-year forms
payments that your employees contribute themselves to an expense or benefit

You must keep these records for three years from the end of the tax year they relate to.

Exemptions

Some expenses and benefits don’t need to be reported, and they include;

business travel
telephone bills
entertainment expenses relating to business
tools or uniforms that are used for work

To qualify you must be paying a flat rate to your employee as part of their earnings – either a benchmark rate or a rate approved by HMRC, and paying the actual costs incurred by the employee.

For more advice and guidance, contact Emma Stevens Accountancy.

Choosing an accountant

15/05/2017 By Emma Stevens

Finding the right accountant is a big decision for any business, and one of the most important decisions you make. If you find a good one, it saves you time and money – a not so good one might potentially do the opposite.

When you’re looking for someone to help you with your accountancy, it’s important to find a good fit, someone you think you’ll be able to work with almost as a business partner. Someone who has experience working with small businesses like your own will be an asset, understanding the way you run the business and the issues you face.

It’s worth speaking to three or more potential accountants before you make a final decision. Ask what qualifications they have and whether they are industry regulated; an ICAEW member, for example, will have professional indemnity insurance, protecting you from any decisions you make on bad advice from them.

Talk to other businesses in your area and see if you can get recommendations for them. Testimonials from existing clients are also good.

Could your money work harder?

A good accountant does more than just take care of your tax return and make sure that your accounts are up to date. If you’re looking for capital, they should be knowledgeable about sources of funding such as grants and tax relief schemes. If there’s anything your business is entitled to, they should be getting it for you.

Don’t be timid when it comes to asking about the fees either, you might be able to arrange package deals, monthly payments or easy payment terms if money is an issue.

Is your accountant going to be a good fit?

It’s absolutely vital that whoever you choose to work with understands the needs of your business, and can give you advice and insight that actually helps. If you can find an accountancy firm that has expertise in your sector, with plenty of background in working with small businesses, they are more likely to understand your challenges, and their prices are likely to fit too. Ask if they have worked with similar firms at the same stage in business as you.

What sort of engagement do you need from them? Some are more distant than others and if it’s important to you that your chosen accountant will be involved in your day to day business development, make that clear from the outset to avoid shocks when it comes to bill payment time. It can be cheaper to use a firm that don’t really have much contact with you but if you have any issues it can make you feel as if you’re imposing, not to mention worrying about the cost.

If you opt for a bigger firm, make sure that you know which member of the company will be dealing with your day to day accounts, and meet them if possible.

Finally, look for an accountant who seems approachable and friendly, and who you can talk to honestly about your business and its issues. You need to find someone who you can trust and relate to when you’re talking about issues that affect your finances.

Writing a business plan

01/05/2017 By Emma Stevens

The idea of writing a business plan might feel a little daunting, but with some planning and the right focus, a business plan can help you to define exactly what your business is, where it’s headed and how it’s going to get there.

Importantly, a well-written business plan can also help you to secure finance if you’re a start-up business, or for any expansion plans.

What is your business?

The most important part of a business plan is to define exactly what you do right at the beginning. This will give the rest of the plan a focus and also help any external parties and potential investors to understand what you do.

To do this you’ll need to go into detail about:

What your business does or will be doing
Your products or services
Whether it will be a bricks and mortar business or operate online (or both)
Prices
What your objectives are for the business, and how you’ll measure your progress towards them.

Identifying your target customers

Do some research beforehand so that you have a clear idea of who your ideal customer is. Think about the type of person you want to buy from you, including:

Their age
Their lifestyle
Their occupation, if they work
Whether they would already have bought a similar service or goods before
What will make them want to buy from you?
How you’ll promote your business to them effectively.

Identifying your customers makes it much easier to successfully promote your business as you already have an insight into what they buy, what they need and how to engage with them.

Naming your business

If you haven’t already named your business, think very carefully about how you want your name to reflect what you do. Pick a name that’s memorable and easy to pronounce, make sure there are no other businesses with a similar name and that the website address is available. If there’s a possibility that you might expand into other countries, it’s also worth checking the meaning of any name you choose just in case it means something you don’t want to be associated with in a different language!

Recruiting

Before you think about taking on staff, decide how many employees you’ll need, how you’ll pay them and whether you’ll offer full or part time employment. Also think about whether you want to employ people as permanent staff members or prefer to work with contractors.

Some of the things you’ll need to consider in your business plan are:

Your legal responsibilities towards any employees
What training or equipment they will need to carry out the work
How they will be managed
How much they will be paid – does it reflect similar positions locally?
The National Minimum Wage and National Living Wage
Will taking on staff benefit the business, and if so, how?

Drafting a business plan

Now you’ve got the content for your plan, you’ll need to compile the actual document.

The main thing to remember is that a business plan needs to be clear, realistic and to the point. Write it in plain English and don’t include industry jargon or acronyms unless absolutely necessary – the person reading the plan may not be familiar with them.

Include the research you’ve done into key areas such as your ideal client, and any evidence you have to support it. Include an action plan with targets and milestones and a conclusion. For detailed help and guidance about what you should include in your business plan and some helpful templates, go to the GOV.UK Business Plan website, or speak to Emma Stevens at Emma Stevens Accountancy Limited for advice.

Is my business ready for a HMRC inspection?

17/04/2017 By Emma Stevens

Nobody relishes the idea of a HMRC inspection. Since 2010 the chances of any business being inspected by HMRC have risen, due to a pledge by the then government to recoup some of the deficit in public finances. Although larger businesses are being looked at more carefully by HMRC, small businesses aren’t escaping the scrutiny of the tax office either. Keeping accurate records is paramount if you want to avoid potential issues in the future.

What happens in a HMRC inspection?

If your business is selected for a tax inspection, HMRC will want to take away all of your business records for the past tax year and come back to ask you questions about them. Should they find that you haven’t paid some of the tax that’s due, they can fine you £100 plus make you pay any tax they believe is owed.

If you’ve just made a simple mistake, they might be lenient, but if they suspect there’s something other than an honest omission going on they could ask you for five years of business records rather than just the one year that’s usual. Most of the time they won’t find anything, and although there’s no penalty, it can cause a lot of inconvenience and worry.

Small firms are often hit hardest by the stress of an HMRC inspection. It can take a while for them to come back to you and confirm that all is OK, while asking you questions, and while you’re in limbo, it can be unsettling.

What triggers a HMRC inspection?

There is a small percentage of random checks every year, but in the vast majority of cases HMRC only triggers an inspection if they think there might be something going on.

HMRC are interested in the ratio analysis – if they notice that your figures change a lot from one year to the next. If inspectors notice any unusual fluctuations in income or expenses on your tax return, they might be a cause for concern, and this can set off what’s called an aspect enquiry where they will want to know more about why the figures have changed so much. Although this is still a worry, it’s less stressful than a full blown enquiry and if they don’t find anything or you can adequately explain the reasons for any differences, it should be fine.

One way to avoid arousing suspicion if there’s a good reason for a big change in your figures is to use the extra space on your tax return form to explain any unusual fluctuations in the businesses turnover or profit.

If you declare everything and keep your records accurately, you should theoretically have nothing to fear from HMRC, although be warned, ignorance is no defence if you’re found to have been routinely making mistakes. Ideally you should make sure that your tax returns are filed on time and in full, so that HMRC doesn’t have any cause for concern.

Keep transparent records

HMRC has the power to obtain information from third parties now, and there are even increased powers to search premises. If your business does come under scrutiny you’ll have to make sure that everything is in order. HMRC also has software it can use to analyse tax returns and compare them to the average for your sector.

Make sure that you have records of absolutely everything that relates to the business – don’t throw anything out. If you don’t keep paper copies of business bank statements, you may have to obtain them from your bank if HMRC decides to inspect you. If you are missing any important information, speak to your accountant to see if there’s anything you can do to fill any information gaps.

Honesty is the best policy

If you know there is an issue with your tax return, it’s best to tell HMRC straight away, explaining why things went wrong or weren’t recorded properly. If you try to cover up glaring omissions or errors, the chances are HMRC will find them anyway and when they do, you’ll face stiffer penalties or even a criminal investigation.

The top three ways to make sure that your business is inspection ready (and avoid being inspected wherever possible) are:

Make sure you always submit your returns on time
Make your tax returns accurate and complete – ask an accountant for help if you need to
Explain any changes from one year to the next on your return. Significant changes in your turnover or gross profits will make HMRC wonder what’s going on, especially if drawings taken from the business or the remuneration paid don’t look right.

If you need help keeping your business records organised contact Emma Stevens at Emma Stevens Accountancy.

What records do I need to keep for my limited company?

19/12/2016 By Emma Stevens

It’s essential that you keep accurate and up to date records when you run a limited company, but do you know exactly what you need to keep in order to stay the right side of the law? Here’s our guide to the documents you’ll need to keep safe and up to date.

Where applicable, you need:

The limited company’s register of members (including shareholders and/or guarantors).

An up to date register of company directors.
Copies of all the directors’ service contracts.
A register of Company Secretaries
A register of People with Significant Control (PSC) – since 6th April 2016 all UK private limited companies have to keep a PSC register with information about the people who have ‘significant control or influence’ over the company. This is an individual (either a person or registrable legal entity) who meets one or more of the following conditions in relation to your company:
- Directly or indirectly holds more than 25% of the company’s issued share capital.
- Directly or indirectly holds more than 25% of the company’s voting rights.
- Directly or indirectly holds the right to appoint or remove a majority of board of directors.
- Has the right to exercise, or actually exercises, significant influence or control of the company
- Has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.
Records of resolutions and minutes of meetings.
Directors’ indemnities – security against liability claims or legal costs.
Copies of contracts that relate to purchases of company shares.
Documents relating to redemption or purchase of own shares from capital by private company.
A register of debenture holders.
Instruments creating charges and register of charges – i.e. mortgages or secured loans.

You also need to make sure that you keep copies of a limited company’s certificate of incorporation, the memorandum and articles of association and any share certificates.

Accounting records should also be kept for the following:

Any goods or services bought for or by the company
All forms of income and expenditure
All of the company’s assets, liabilities and creditrecords
A full inventory of all stock and assets owned by the business at the end of each financial year
The stock takings that have been used to work out the inventory figures
Details of companies or individuals who goods and services have been bought from and sold to, with the exception of retail sales.

The businesses financial records and business bank account statements are used by accountants to calculate your annual accounts, your corporation tax liabilities, and to prepare Company Tax Returns for each accounting period.

If your business is VAT registered, you’ll also need to keep all of your business and VAT records do that you can accurately account for all VAT transactions, and complete VAT returns.

If you’re registered as employer you have extra responsibilities; you must also keep PAYE records so that you can work out the right amount of PAYE and NICs to pay, for your annual PAYE returns, and also to show that your employees are receiving any statutory pay they are entitled to.

How do you keep your limited company business records?

The best way to keep accounting and business records is in hard copy format in a bound or loose-leaf book, and/or electronically using accounting software.

Companies House assumes that all your business records are held at your company registered office address. You might also be able to use a Single Alternative Inspection Location (SAIL) address if this isn’t physically possible or convenient. If you do use a SAIL address, you must tell Companies House where, and which records are being held there. If you move the records, you’ll need to tell Companies House, and you also have to confirm their whereabouts every time you file an annual confirmation statement.

For more advice on business record keeping and other accounting needs, contact Emma Stevens at Emma Stevens Accountancy.