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Newsletter March 2014

Welcome to this month's newsletter

Later this month the Chancellor, George Osborne, will be presenting the 2014 Budget. We have listed below a few of the changes that we are expecting. We have also covered the announced financial benefits that are being offered to flood victims; a reminder of the need for planning if you are considering a sale of your business; and the benefits of using the VAT Flat Rate scheme.

Our next newsletter will be published Thursday 3rd April 2014.

Value Added Tax

This scheme can be beneficial for businesses that have a low proportion of costs that include a VAT input tax charge, and their business turnover, excluding VAT, does not exceed £150,000.

One interesting feature of the scheme is that you do not have to leave the Flat Rate scheme until your annual income, including VAT, exceeds £230,000.

The only way you can make an effective choice, to join the scheme or not, is to rework your VAT position for say the last four quarters and see how a Flat Rate calculation compares to your current method.

If you have negligible input tax to reclaim, you are within the registration threshold, and the flat rate percentage that applies to your trade sector is favourable, then converting can produce real cash savings.

If you would like to see if your business could benefit we would be happy to help you crunch the numbers.

Compensation for flood victims

The following announcements were posted to the GOV.UK website last month. They provide details of some of the compensation being offered to businesses affected by last month’s flooding across the UK:

Cash compensation

Measures include:

  • A £5,000 repair and renewal grant for all affected householders and businesses. The aim is to top up money received from insurers to build in flood resilience when property is repaired.
  • All affected businesses will qualify for 100% business rate relief for three months.
  • Businesses will also get an extra three months to pay business taxes.
  • A £10m fund for farmers suffering water-logged fields.
  • A £750m commitment from banks to provide financial support to those in need.

A new Business Support Scheme

The scheme is worth up to £10million to provide hardship funding for SME businesses in areas affected by the floods. Both businesses that have been flooded, and businesses that are in affected areas and have suffered significant loss of trade, will be able to apply for support. Eligible businesses will be able to claim for funding for things like immediate clean-up costs, materials, and exceptional costs to help them continue trading.

Extra time for businesses to file accounts without any penalties

If any affected company is unable to file accounts or other documents on time as a direct result of the floods, Companies House will agree an extension and not collect the penalties which apply for late filings. Applications for extensions should be made before the end of the filing period.

A Government Business Support Helpline

The Helpline is providing comprehensive advice and support to businesses affected by floods. It will offer a free 1 hour call with a dedicated Business Support Adviser to help businesses get back on their feet. The helpline number is 0300 456 3565 and can take calls from flood affected businesses now.

Alongside this government action, the government also welcomes the initiative from Enterprise Nation to bring together big business offers of assistance to small firms affected by the floods. These offers of assistance include:

  • Regus, the global workspace provider with 220 business centres across the UK, is coming to the aid of businesses by offering free workspace to workers affected by the floods. Those who cannot work in their normal location – whether that’s an office or their home – will be given free access to the business lounge within any Regus centre, providing professional workspace, wifi and complimentary refreshments.
  • Citrix has pledged to support small businesses affected by the floods by letting them use GoToMeeting free on a trial basis for up to 3 months (90 days) for quick and easy online meetings with employees and customers. GoToMeeting is quick to install and allows you to connect face-to-face and work with people important to your business via a mobile, tablet or PC wherever you or they happen to be.

Entrepreneurs’ Relief

Having spent many years building a business, entrepreneurs can still look forward to a maximum tax hit of just 10% when they sell their business, as long as they have organised their business affairs so that they qualify for the CGT Entrepreneurs’ Relief.

Basically, you will need to demonstrate that you meet certain criteria for the year ending on the date you dispose of your business. For example, if you run your business through a company:

  1. The company must be considered to be a trading company. Exceptionally, where a company ceases to be a trading company within a period of three years before the date of disposal, the qualifying period will end on the date the company ceased to trade.
  2. You will need to own at least 5% of the ordinary shares that carry at least 5% of the voting rights.
  3. You will also need to have been an officer or employee of the company.

These conditions are just the tip of the compliance ice berg. We heartily recommend that you seek professional advice if you are thinking of selling your business or the assets used in a business. The key is to determine the “qualifying period” for your disposal and ensure that you meet any other criteria. There are different rules for businesses run as a sole trader or partnership.

The benefits in tax saved are well worth the investment.

Expected tax changes in the Budget 2014

The government has already published certain draft clauses for the Finance Bill 2014. We have listed below some of the more topical changes disclosed.
Changes for the tax year 2014-15:

Personal Tax:

  • Individuals born after 5 April 1948 will be entitled to a personal tax allowance of £10,000.
  • Employees will be able to increase the maximum value of shares acquired under Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes. The increased limits will be: SIPs - £3,600 on the free shares that can be awarded to employees and £1,800 on the partnership shares employees can purchase; SAYE – the monthly amount that employees can save will be increased to £500.
  • It is proposed that the annual exemption limit for employer-related loans, to be treated as earnings, will be increased from £5,000 to £10,000.

Capital Gains Tax:

  • The annual exempt amount is to be increased to £11,000.
  • The rule that exempts the final 36 months of ownership of a private residence from CGT is to be reduced to 18 months. The 36 months will still apply if the owner is disabled or moved into a care home.

Business Tax:

  • HMRC is introducing new legislation affecting Limited Liability Partnerships. Members of LLPs who satisfy the new criteria as “salaried members” will effectively lose their self employed status and be taxed under the PAYE legislation. There will also be restrictions on the way in which mixed partnerships, those with individual and typically corporate members, allocate profits and losses. 

Changes for the tax year 2015-16:

It is proposed that spouses (including civil partners) will be able to transfer up to £1,000 of their personal allowance to their spouse (or civil partner). This will be a useful, although somewhat limited, tax planning device that will allow couples to partially equalise their taxable incomes. It will only apply where neither party is a higher rate tax payer.

Tax Diary March/April 2014

1 March 2014 – Self Assessment tax for 2012/13 paid after this date will incur a 5% surcharge.

1 March 2014 - Due date for Corporation Tax due for the year ended 31 May 2013.

19 March 2014 - PAYE and NIC deductions due for month ended 5 March 2014. (If you pay your tax electronically the due date is 22 March 2014.)

19 March 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 March 2014.

19 March 2014 - CIS tax deducted for the month ended 5 March 2014 is payable by today.

1 April 2014 - Due date for Corporation Tax due for the year ended 30 June 2013.

19 April 2014 - PAYE and NIC deductions due for month ended 5 April 2014. (If you pay your tax electronically the due date is 22 April 2014.)

19 April 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 April 2014.

19 April 2014 - CIS tax deducted for the month ended 5 April 2014 is payable by today.