Insider – Financial News Digest – July 2018

Keeping you up to date with the top financial stories, rumours and talking points you need to know right now.

Calls increase for reform of ‘flawed’ apprenticeship levy

Pressure is mounting on the government to reform the apprenticeships system, following recent apprenticeship levy statistics.

The Institute of Directors (IoD) has joined the British Chambers of Commerce (BCC) in urging the government to address ongoing problems with the levy.

Apprenticeship starts were down 25% for the seven months to February 2018 compared with the previous year, according to statistics from the Department for Education.

The apprenticeship levy, which has been in place since 6 April 2017, means businesses with an annual wage bill of more than £3 million must pay the levy towards apprenticeship funding.

The levy is charged at 0.5% of the annual wage bill, and each employer is eligible to receive an allowance of £15,000 to offset against their levy payment.

Seamus Nevin, head of policy research at the IoD, said that “while the motivation behind the policy is laudable, the execution is flawed”.

He suggested the system could be reformed by giving businesses more time and flexibility when using levy funding.

Nevin said:

“If we want to boost skills, productivity and wages in our economy then the [apprenticeship] system must be reformed.

“Businesses should be afforded the flexibility to invest in more tailored courses, firms need longer to spend the money so they can use it on the apprenticeships of greatest value and larger companies could also be allowed to transmit more of the funds down to where it’s most needed.”

Jane Gratton, head of skills at the BCC, also saw inflexibility as one of the main problems with the levy, which has felt “more like a tax” for larger firms.

Meanwhile, she said the changes to apprenticeships have only “added to the barriers, complexity and cost of recruiting and training staff” for SMEs.

Gratton added:

“There is a consensus among the UK business community that the levy needs reform, yet our calls continue to go unanswered.

“Each month the number of apprenticeships is falling, so now has to be the time for government to work with business and training providers to sort things out.”

We’re happy to discuss the apprenticeship levy.

‘Raise the VAT threshold to stimulate SME growth’

The Association of Independent Professionals and the Self-Employed (IPSE) has called for the VAT threshold to be increased, in response to a government consultation.

The current £85,000 threshold at which businesses must register for VAT has been frozen until 2020, while the government deliberates on its approach to the tax.

Chancellor Philip Hammond considered lowering the VAT-registration threshold before Autumn Budget 2017 to bring the threshold closer to global standards and the EU average of £20,000.

Estimates suggested that reducing the threshold from £85,000 to £43,000 would net the Treasury an extra £1.5 billion a year, while decreasing the threshold to £25,000 could fetch up to £2 billion.

More than half a million businesses currently below the registration threshold would need to register for VAT if it was lowered, according to the Office for Tax Simplification.

IPSE warned against decreasing the threshold, arguing this would “actively discourage” growth as well as forcing business owners to either raise prices or absorb the costs.

Instead, the organisation suggests raising the threshold annually in line with the retail prices index measure of inflation, which it says would incentivise growth and innovation in small businesses.

The comments came in response to the government’s call for evidence on the VAT threshold, which ran from 13 March to 5 June 2018.

Other suggested policy solutions include a “smoothing mechanism”, which would introduce the tax more gradually.

Andy Chamberlain, deputy director of policy at IPSE, said:

“Presently, the self-employed contribute £271 billion to the UK economy every year.

“Increasing the VAT threshold would create a nurturing environment for our smallest businesses to thrive, expand and further increase the overwhelming value they provide.”

Contact us to discuss managing VAT.

SMEs miss out on business savings interest

Small business owners could alleviate pressure on their cashflow by paying more attention to business savings interest, according to a report.

Aldermore polled 950 SME owners and sole traders and found that 62% are earning no interest on their business savings at all.

Over half (53%) are earning less than £300 a year in interest on their business savings, while 65% had the same business bank account as their personal account provider.

While consistently low interest rates offer little incentive to save, 33% of respondents said they were spending their cash too quickly each month.

Around a fifth (19%) claim their bank does not offer high enough rates for noticeable interest to be earned.

Ewan Edwards, head of savings at Aldermore, is urging sole traders and business owners to conduct due diligence to find the best banking products on the market.

Edwards said:

“It is vital business owners make their surplus cash work harder to provide additional financial support and to strengthen financial resilience.

“Many businesses could be missing out on additional income that would be a boost when dealing with the multiple financial pressures of running a business.

“We encourage all business owners to shop around to find the best account on offer, as this can make a positive difference in the long term.”

Talk to us about your business.

Working pensioners pay £8.6bn in income tax

Working pensioners are on course to pay £8.6 billion in income tax in 2018/19, according to Aegon.

The number of pensioner households containing at least one person working beyond their state pension age increased from 12% in 1997/98 to an estimated 17% in 2018/19.

Aegon estimates there are around 12.8 million people living in 8.7 million pensioner households in the UK, with around 1.4 million homes containing a working pensioner.

Steven Cameron, pensions director at Aegon, said:

“Gone are the days when reaching state pension age meant a total end to work.

“Many people are choosing to keep working and earning, even once they’ve started taking their pension.”

Weekly wages in pensioner households increased 30% over the same 20-year period – up from an average of £410 in 1997/98 to £534 in 2018/19.

Working pensioners who are single have seen their weekly wages rise 71%, from £199 to £340 per week over the same period.

Pensioners who continue to work past their state pension age and pay tax on that income are providing a boost to the economy, but Aegon warned against complacency.

Cameron added:

“These people are contributing significant amounts to the nation’s finances through the tax they generate, while also helping the broader economy through their work.

“We’re living in what has been described as a golden era for pensioners, with many benefiting from generous final salary pensions and increases to the state pension.

“When you combine this with earnings from post-retirement work, it’s not surprising that many pensioners are living on very decent incomes.

“However, these are unlikely to continue so it’s important that society changes with more people able to choose to work past traditional retirement ages.”

Get in touch for tax planning advice.

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Davis Grant achieves Gold Champion Partner Status with Xero

Davis Grant is now a Xero gold partner. Xero forms a key part of our Cloud Accounting Software solution by providing you with market leading online bookkeeping including a direct link to import your bank statements, live dashboards, reports and alerts.

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Learn About Xero

This new status as a partner reflects an ethos throughout Davis Grant to provide proactive and timely advice capitalising on the technology best suited for your needs.

Modernisation is especially critical to your business given HMRC’s Making Tax Digital initiative. Digital tax requiring online records is currently in a pilot scheme and will be introduced to VAT registered businesses next year.

Speak to us today to explore the Clear Benefits of Cloud Accounting and how Xero can help you achieve your goals.

Clear Benefits of Cloud Accounting

Davis Grant Treats it’s Team

Our team of experts are always working hard for you. To show appreciation for all their efforts today masseuse Elena visited the office to loosen up tired shoulders and backs.

Did you know that as well as a healthy and active lifestyle there is increasing evidence that we also need to spend less time sitting down? Sitting for long periods is thought to slow the metabolism, which affects the body’s ability to regulate blood sugar, blood pressure and break down body fat.

If you spend a lot of time at a desk or on your laptop make sure you review these tips from the NHS on how to sit correctly.

Tax Tips and News – July 2018

Welcome to July’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

This month’s topics

  • MTD update
  • EU mandatory tax disclosure rules take effect
  • CGT payment date under consultation
  • HMRC continue to face issues with TRS
  • July questions and answers
  • July key tax dates

Please contact us for advice in your own specific circumstances. We’re here to help!

Read More

London Tech Week Event

Thank you to everyone who attended our London Tech Week event last week. Specific thanks to our Speaker and Tech Hub for co-hosting.

It was great to see so many join us to learn from professionals and peers about how the help of a great accountant is critical when you want to grow your business. Whether you made it to the event or not we hope you had an amazing week celebrating Tech in London.

We have a couple of very quick videos  that you might find useful. One specifically covers the R&D tax credit and how our clients have received over £1m in cash from HMRC as a result of our specialist R&D work, providing a critical cashflow boost.

As a responsible business leader you already have the help of an accountant. But are you getting the help you need from them? If you are interested in a no-obligation chat with one of our award winning team please just get in touch.

Tax Tip and News – June 2018

Welcome to June’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

This month…

· Using tax to keep employees healthy
· Investors’ relief
· IT contractor wins IR35 case
· Corporate offences guidance updated
· June questions and answers
· June key tax dates

Please contact us for advice in your own specific circumstances. We’re here to help!

Read More

HMRC gets inventive

16% jump in compliance take from investigations into payroll and expenses

HMRC continues to be inventive in its hunt for extra tax revenue – always searching for new areas to investigate. One recent trend we’ve spotted is an increasing crack down on payroll and expenses.

Crackdown on Payroll and Expenses

PenaltiesIts investigations in this area stretch from payment of self-employed contractors through to business expenses such as hotel bills which HMRC argues are hidden perks that need to be taxed. This new area of focus has put a growing number of businesses and individuals at risk of inquiries from the taxman.

The amount of additional tax collected by HMRC through investigations into payroll and expenses increased 16% last year to £819m, up from £705m in 2015/16.

Investigations into payroll and expenses could cover some pretty normal issues such as staff rewards, travel to and from work, and even health club subscriptions. These detailed inquiries into what can seem like small ticket items sit alongside broader brush inquiries into areas such as Corporation Tax and VAT.

Self-Employed Workers

A key area of focus for HMRC has been the increasing use of self-employed workers by businesses in the UK. HMRC believes the incorrect classification of workers by businesses means it is losing out on National Insurance Contributions each year.

To combat this, HMRC has set up specialist Employment Status & Intermediaries teams to help it with its payroll investigations into businesses.

SME Businesses being Targetted

HMRC is increasingly seeing businesses as a more productive revenue source than individual taxpayers. By targeting the payrolls of businesses, HMRC can investigate the affairs of multiple taxpayers at once – several birds, one stone.

Many of the businesses targeted by HMRC in its crackdowns are SMEs. These businesses are often viewed as an easier target by HMRC as they are unlikely to have the in-house resources to close down or limit tax investigations.

What you can do

Businesses need to be proactive and ensure that any discrepancies in their payroll or expenses can be accounted for. Failure to do so could result in costly investigations.

You can protect yourself against the cost of most tax investigations by subscribing to our Tax Investigation Service. To find out more contact us.

Tax Tips and News – May 2018

Welcome to May’s Tax Tips & News, our monthly blog designed to bring you tax tips and news to keep you one step ahead of the taxman.

This Month’s Tax Topics

  • Use gift Aid to save tax
  • Diesel car supplement increase takes effect
  • HMRC update guidance on managed service companies (MSCs)
  • When are tips taxable?
  • May questions and answers
  • May key tax dates

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

Please contact us for advice in your own specific circumstances. We’re here to help!
Read More

How to approve your tax return on our Document Portal

When our work is complete, login to our Document Portal to review and approve with a digital signature. The secure portal is your digital document safe and means no more delays or postage costs when submitting and receiving your files.

Step One – Login to the Portal

  1. Access the Document Portal by going to
    www.davisgrant.co.uk/portal
  2. Enter your email address.
  3. Enter the password you selected when you opened your account.

If you cannot login and need help please get in touch with our friendly team to assist.

Forgotten Your Password?
How to access our Portal for the first time.

Step Two – View the Return

You cannot approve a document until you have viewed it at least once…

  1. Select a Dashboard option or on desktop click Your Files from the menu.
  2. Navigate folders by pressing on the folder name. Documents awaiting your approval are typically stored in Documents to Approve.
  3. Simply select a document’s name to view or download it.

Step Three – Electronic Approval

  1. Go back to the file list and locate the relevant document.
  2. On desktop – press the Approve button.
    On mobile – press the small button next to the document name and then the Approve icon.
  3. To give final confirmation, sign the document by selecting Approve.

We will receive notification that you have approved the tax return and will take appropriate action. If you have any concerns please get in touch.

Payroll Update – Financial Year 2018/19

The new financial year began 6th April 2018. This means that new rates and limits are applied to you and your business. The changes are summarised below and we will be making changes based on the new rules as appropriate.

Minimum Wage

Take note of the new National Living Wage and the National Minimum Wage, they change every April. If we process your Payroll for you we will increase rates automatically on your behalf.

25 and over 21 to 24 18 to 20 Under 18 Apprentice
£7.83 £7.38 £5.90 £4.20 £3.70

If you need help paying your employees our expert team stand ready to help.

Pensions Contributions

Employers may be required to increase the amount of their contributions into their automatic enrolment pension. Staff members will have to make up whatever shortfall remains of the new total minimum contribution.

Date effective Employer
Contribution
Staff
Contribution
Total
Previously (until 5 April 2018) 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

Are you prepared to handle your pension responsibilities? Even if you only have a single employee the rules apply to you. Let us know if we can help.

Director Salaries

The salaries for Directors may be set at the primary threshold to be tax efficient. This has increased as outlined below and we will make adjustments if necessary.

Date effective Per Week Per Month Per Year
Previously (until 5 April 2018) £157 £680 £8,164
6 April 2018 to 5 April 2019 £162 £702 £8,424

Termination Payments

Please be advised that from 6th April 2018 all payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NICs. This change means the tax and NICs are no longer dependent on how the employment contract is drafted or whether payments are structured in some other form.

Need Advice?

If you have any questions or need any advice please let us know. Either reply to this email or get in touch.

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