Accountants With A Difference
    • The Difference
    • Start-ups
    • Ltd or Not?
    • News
    • Testimonials
    • Contact
    5 Jun 2018

    VAT and Online Selling

    Please note that on 15 March 2018 a new VAT law came into effect which is designed to ensure that people who sell through online marketplaces pay the right amount of VAT on the goods they sell in the UK.

    If you have an e-commerce site which sells your own goods but also allows other people to sell their products, you need to ensure that those third parties are registered for VAT (if they need to be).

    Overseas businesses

    Must be registered for VAT in the UK if they sell VATable goods to UK based customers which are either:

    • Stored in the UK, or
    • Will be imported into the UK by the seller.

    This is regardless of whether the overseas sellee has a UK establishment or how many items they sell.

    If you knew, or should have known, that an overseas seller should have registered for VAT in the UK, the marketplace can be made liable for any unpaid VAT due on sales made through the site. The marketplace must stop these people from offering goods through the site, and will continue to be liable for the VAT due until they meet their UK VAT obligations.

    UK based businesses

    Must be registered for VAT in the UK if their VATable turnover exceeds £85,000 in any 12 month period.

    Again If you knew, or should have known, that a seller should have registered for VAT in the UK, the marketplace can be made liable for any unpaid VAT due on sales made through the site. The marketplace must stop these people from offering goods through the site, and will continue to be liable for the VAT due until they meet their VAT obligations.

    5 Jun 2018

    IR 35 Update

    Many construction workers or professional services providers operate through their own personal service companies. HMRC have tried (with some success) to classify many of these as employment contracts rather than business to business relationships, as the tax paid on employment contracts is considerably greater.

    Recently a building contractor won a case with HMRC which offers some clarification about how the rules should be followed.

    In this case HMRC had to prove that the indications of employment existed in the hypothetical contract and they out-weighed the indications of self-employment. The judge helpfully summarised the various factors which pointed to employment or self-employment.

    For employment:
    •No substitution of person performing the work is permitted
    •the employee takes no financial risk
    •Safety equipment is provided by the employer

    Against employment:
    •The contractor was not controlled by the company any more than any other contractor
    •the contractor had the right to refuse to work in different locations
    •The contractor was paid a fixed rate per day
    •There was no notice period
    •No sick pay or holiday pay
    •No employment benefits
    •No expenses paid for travel or accommodation
    •The contractor was not integrated into the company

    The key element of the case demonstrates that one factor (such as substitution) should not outweigh all other factors, and the entire relationship must be considered in its entirety to determine whether someone is employed or a contractor.

    5 Jun 2018

    Salary v Dividend v Licence Fee

    In one of George Osborne’s last budgets he announced that the first £1,000 of rental income received can be tax free.
    Rather than identifying costs offsetting to the rental income an allowance of £1,000 can be claimed instead.
    If properties are jointly owned this is £1,000 per person.

    Unfortunately there are a number of rules which make the usage difficult, one of which is rental income from a “close” company or a company the owners of the property “are employees of or participants in”. This means it cannot be used for Home Use relating to small limited companies or LLP’s.

    Despite this the use of a Home Use Rental or License can still be tax effective. For the following two reasons:

    1) Part of the “property income” generated can be offset by prorating property costs as Gas, Electricity, Insurance, Rent, Water, Council Tax (the latter of these often being questions by HMRC in typical home use calculations but not, so far, in property cost calculations). This makes part of the income tax free.

    2) Tax on the excess after 1) above can be a more cost effective approach. As shown in the example below.

    Assuming that all the Dividend Allowance taxed at 0% and the Salary up to the NI threshold has been used and you have a £1,000 you wish to take from the business.

    For simplicity the numbers below also assume you are in the 20% income tax bracket and so employees NI is paid at 12.8% . We will also assume a best case that the employee allowance offsets employers NI. The calculation can be done for other tax brackets.

    Method 1 ….. Salary

    Tax would be 20% Income tax and 12% hence Tax/NI paid £320 and net £680.
    (with employers NI an extra 13.8% tax could be paid)

    Method 2 ……. Dividend

    Dividend is taken after Corporation Tax …. For 2018 19 this is 19%. Therefore from £1,000 Corporation Tax would be £190 and £810 left. This would incur 7.5% Dividend Tax (£60.75) leaving £749.25 Net.

    Method 3 ……. Home Rental (above prorated costs)

    As this is an allowable expense for Corporation Tax purposes the £1,000 income incurs the marginal rate of tax for the person which in this example is 20% so £200 making leaving £800 Net.

    Therefore after paying a salary to just above the employee threshold levels the results for tax for an extra £1,000 are …
    1) Rental Income £200;
    2) Dividend £250.75;
    3) Salary £320.
    (Remember these are after taking the tax free, 0% allowances)

    WARNINGS …..
    If the property is jointly owned then the property income should be jointly shared.
    If one of the property owners marginal tax rate is above the 20% threshold then the results will change.
    A “fair” rent should be charged.
    As HMRC advise “Dividends should not be used in lieu of Salary”
    Consider Capital gains implications on setting up Rental/License Agreements.

    for web 3
    21 Aug 2016

    Tax Dates – August to December – a very busy period every year!

    Regular Monthly Dates

    19th – Last day for CIS return and payments due for previous month.

    .       – Last day for Payments relating to RTI Returns for previous month (if on monthly).

    .      – Last day for previous month RTI Returns for “periods with no payments made”.

    VAT returns due for businesses with VAT periods ending at the end of the previous month.

    Corporation Tax due for Limited companies with Year End due 9 months previous – December 31 year end Tax due 1 October (9 months and 1 day after year end).

    Companies House Filing for Limited companies with Year End due 9 months previous – December 31 year end Companies House Accounts Submission due 30 September (9 months after).

    Click more to see some specific monthly dates ….. More

    For website 2
    16 Jun 2016

    Some Key Changes from 2016 17 onwards

    Some key tax rules are changing that will effect small businesses. These include

    New dividend tax rules …..  essentially after individually receiving £5,000 dividend (a year) a 7.5% extra tax will be incurred by the shareholder.

    Employment Allowance restrictions are also increasing …..  service companies and one man director businesses are excluded

    Removal of P11D dispensations …..  essentially certain expenses that businesses paid employees (including directors) could be excluded from BIK reporting (BIK = Benefit in Kind), now [from April 16 but in 16/17 reporting] more [not all] will need to be reported on a P11D [for the PAYE year 2016 17].

    Auto enrolment starts to effect small businesses and you should be have received information on this as to your enrolment date. Some small businesses are exempt.

    but there is also some potential good news ….

    with the changes to “rental” income allowance for 2017 18, by the use of a licence agreement for home use you could potentially save some tax (potentially £500 to £2,000). As always we will wait for the detail regulations next year.

    Please seek tailored advice on how these will effect your buiness.

    Scam HMRC email
    2 Aug 2015

    Three Tax refunds within the same day!

    I must be very lucky as last week I got three tax refunds (due to myself) on the same day, ranging from just over £300 to over £1,000.

    Obviously these were false.

    A lot of very well crafted emails – sometimes with the HMRC logo – are being sent. Don’t be taken in.

    HMRC will not contact you by email but any clients who are in doubt please call me before you divulge personal information.

    Be safe rather then sorry.

    1 2

    Latest News

    • VAT and Online Selling
    • IR 35 Update
    • Salary v Dividend v Licence Fee
    Accountants With A Difference
    © 2022 Accountants With A Difference
    Aubecreative Web Design
      • Home
      • The Difference
      • Testimonials
      • Latest News
      • Contact

      Accountants with a Difference Ltd

      Registration No. 5657295

      (England and Wales)

      Rhovanion House

      Main Street, Skelton on Ure,

      Ripon, HG4 5AJ.

      This website uses harmless cookies to enhance your browsing experience. We'll assume you're ok with this, but you can opt-out if you wish.Accept

      Privacy Overview

      This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
      Necessary
      Always Enabled
      Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
      Non-necessary
      Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
      SAVE & ACCEPT