Is this a good time to invest if you are in business?

Actual business investment in the UK fell in the last quarter of 2014. This was largely driven by the reduction of investment in North Sea oil and gas exploration as global energy prices continued to fall.

Additionally, smaller businesses may have been waiting to see the outcome of the election.

Should you reconsider investment at this time? Certainly, it’s worth taking advantage of the current 100% write off available to those businesses making qualifying purchases of equipment and commercial vehicles. As mentioned in our other blog posting today, currently HMRC will allow businesses to write of up to £500,000 against their taxable profits. This relief is due to reduce after 31 December 2015.

Certainly, businesses should not let the tax tail wag the dog. Financing capital expenditure also needs to be taken into account. Businesses will be unlikely to spend hard earned liquidity especially if they operate in competitive markets where there is downward pressure on margins.

If you are in need of new plant or equipment planning your investment is critical. We would be delighted to help. Call any time to make an appointment.

So now we know. For the next five years we will have a Conservative government, albeit, with a slim majority in the House of Commons.

From a tax point of view George Osborne is continuing as Chancellor and we can probably expect more of the same as he struggles to reduce the deficit, repay debt and maintain a steady increase in economic growth. No mean feat if he achieves this.

As we reported in out last posting to this blog, it is likely there will be a second Finance Bill this year, reinstating the items that were dropped from the first Bill in order to close down government business before the election.

David Cameron also promised to increase the inheritance tax threshold to £1m for married couples and civil partners. We should expect further announcements to remove the higher rate tax relief for pension contributions. Persons who are considering significant contributions to their pension this year should speak with their advisors sooner rather than later if they want to benefit from the present higher rate relief regime.

At the end of this year the present Annual Investment Allowance limit of £500,000 is due to reduce to just £25,000. Hopefully, Mr Osborne will announce a continuation of this valuable tax incentive for businesses in the next Finance Bill.

George Osborne does have an unenviable task. If he depresses economic activity, by severe cuts to government expenditure, tax payers will not be encouraged to spend and GDP will fall. Add to this the anticipated referendum on Europe and the effects of the Scottish vote, and more of the same may be an understatement…

 This posting lists a few (but not necessarily all) of the tax issues you will need to consider when you are planning a new business:

1. Get you business registered with HMRC, failure to do this can lead to penalties. If you are incorporating your business, HMRC generally pick up your business registration via their links with Companies House. But if you are aiming to be self employed, as a sole trader or in partnership, you will need to notify HMRC within certain time limits of your commencement date.
2. In similar vein, if you need to employ staff you must register as an employer with HMRC.
3. If you intend to register for VAT from the date you commence to trade you can still recover input VAT that you have paid on certain setup costs that you expended prior to the official start date.
4. If you intend to register your business for VAT could you take advantage of one of HMRC’s special VAT schemes? For example:

1. Cash accounting: pay over the VAT you have collected on your sales when you are paid by your customer, rather than when you issue your sales invoices. There are turnover limits to registration, but this option can have a significant impact on cash flow if the amounts you are owed is more than the amounts you owe.
2. Flat rate scheme: using this scheme you calculate the amount you owe as a fixed percentage of your turnover each quarter (including VAT). For smaller businesses, who do not have significant VAT inclusive costs, this scheme can produce additional profits and simplify the calculation of your quarterly returns.
3. Annual accounting: using this scheme you send in one VAT return a year instead of the usual four. Also for nine months of the year you make agreed payments on account to cover VAT due. The scheme is simple to administer, only one set of calculations per annum, and the monthly payments help to spread the cash flow impact of payments made.

5. Invest in tax planning. The UK’s tax code is one of the most complex in Europe. We recommend that you take tax planning advice before you start in business and again at certain key moments in your trading year. At the very least you should discuss your trading results with your advisor before the end of your first trading year. It always pays to see what planning options are available before you take action to implement change.

If you are about to set-up a new business please call, we offer a no obligation first appointment to prospective new clients.    

19 May 2015 – PAYE and NIC deductions due for month ended 5 May 2015. (If you pay your tax electronically the due date is 22 May 2015.)

 19 May 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2015.

 19 May 2015 – CIS tax deducted for the month ended 5 May 2015 is payable by today.

 31 May 2015 – Ensure all employees have been given their P60s for the 2014-15 tax year.

 1 June 2015 – Due date for Corporation Tax due for the year ended 31 August 2014.

 19 June 2015 – PAYE and NIC deductions due for month ended 5 June 2015. (If you pay your tax electronically the due date is 22 June 2015.)

 19 June 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2015.

 19 June 2015 – CIS tax deducted for the month ended 5 June 2015 is payable by today.

HM Revenue and Customs has secured three tribunal wins against tax avoidance schemes, protecting over £260 million in tax.

All three rulings uphold earlier judgments in HMRC’s favour at the First-tier Tribunal.

The Upper Tribunal dismissed an appeal brought by users of a scheme that sought to create artificial losses by using a combination of the employment Income and Capital Gains Tax rules on share options. The judges dismissed the appeal without needing to hear substantive arguments from HMRC, and indicated that written reasons would follow. There were 420 users of this scheme.

The Upper Tribunal also dismissed two other cases. These bespoke schemes were designed by banks to provide the users with a much higher tax-free return on their cash deposits than they could have obtained by placing funds in a normal deposit account. Both of these schemes were marketed and sold by banks some years ago for substantial fees. The court joined these two separate cases because of similarities between the schemes.

If you pay your employees a mileage rate for the business use of their personal vehicles, as long as you do not exceed the approved rates per mile, there is no necessity to report these payments to HMRC and the payment will not be treated as a taxable benefit. Employers and employees may also find the notes that follow instructive:

1. The maximum tax free rates per mile for the use of a car are: 45p per mile for the first 10,000 business miles and 25p per mile thereafter.
2. Employers are not obliged to pay these rates, but if they are exceeded the excess will need to be reported to HMRC as a benefit in kind.
3. If employers pay less than the 45p (25p) rates the employee can obtain tax relief on the difference by making a claim to HMRC.
4. Employers can reclaim the deemed VAT on the fuel elements of the mileage allowance payments by using the approved fuel rates. See table below.

 Advisory fuel rates per mile from 1 March 2015 are:

• 1400cc or less: petrol 11p; LPG 8p.
• 1401-2000cc: petrol 13p; LPG 10p.
• Over 2000cc: petrol 20p; LPG 14p.

 Diesel rates are:

• 1600cc or less: 9p
• 1601-2000cc: 11p
• Over 2000cc: 14p

 Example:

 David is paid for a 200 mile business trip at 30p per mile (his annual business mileage claims are well below the 10,000 maximum). He runs a 1500cc petrol car. He can make a claim to HMRC to deduct £30 mileage allowance from his taxable pay (200 x 15p).

 His employer can recover VAT input tax on the fuel element (200 x 13p) x 1/6 = £4.33.

 If you would like help to make back-dated claims to recover VAT if you are an employer; or make a claim if you are paid less than the 45p (25p) rate, please call for further advice.

The published list of tax changes that affect primarily businesses are listed below.

• The Corporation Tax rate has been reduced to 20%
• The new Diverted Profits Tax has been introduced
• The bank levy has increased from 0.156% to 0.21%
• Air Passenger Duty has been restructured – abolishing bands C and D
• Hospice charities, blood bikes, search and rescue, and air ambulance charities will be eligible for VAT refunds
• Business rates changes (England only):
  • The business rates multiplier has increased from 48.2p to 49.3p (47.1p to 48.0p for small business multiplier). This includes the 2% inflation cap
  • The Small Business Rate Relief scheme has doubled for a further year – providing 100% relief for businesses with a single property with a rateable value of less than £6,000, and tapered relief with a rateable value of £6,000 – £12,000
  • The business rates discount for shops, pubs, cafes and restaurants with a rateable value of £50k or below has increased from £1,000 to £1,500
• The cultural test for high-end TV tax relief has been modernised and the minimum UK expenditure requirement for all TV tax reliefs has reduced from 25% to 10%
• A new tax relief on the production of children’s television has been introduced
• The amount of banks’ annual profit that can be offset by carried forward losses has been restricted to 50%
• Two new bands for the Annual Tax on Enveloped Dwellings (ATED) have been introduced
• Capital Gains Tax exemption for wasting assets will only apply if the corporate selling the asset has used it in their own business
• An investment allowance for North Sea oil and gas, replacing the existing offshore field allowances and simplifying the existing regime, has been introduced
• A reduced rate of fuel duty to methanol will apply – the rate is 9.32 pence per litre
• Fuels used to generate good quality electricity by CHP (combined heat and power) plants for onsite purposes are exempt from the Carbon Price Floor
• Climate Change Levy main rates have increased in line with RPI
• The VAT registration threshold has increased from £81,000 to £82,000 and the deregistration threshold from £79,000 to £80,000
• Scottish Government’s Land and Buildings Transactions Tax (LBTT) will replace Stamp Duty Land Tax in Scotland
• The associated companies rules have been replaced with simpler rules based on 51% group membership
• The standard and lower rates of landfill tax have been increased in line with RPI

Again, if you need more information on any of these changes please call.

 HMRC has kindly published a list of the tax changes that affect individuals from 6^th April 2015. We have reproduced the list below.

• Individuals over the age of 55 have flexible access to their defined contribution pension savings
• The Income Tax Personal Allowance increases to £10,600
• The higher rate Income Tax threshold increases to £42,385
• The new Marriage Allowance comes into effect
• The starting rate of savings Income Tax reduces from 10% to 0% for savings up to £5,000
• The cash ISA limit increases to £15,240
• Child Trust Funds can now be transferred into Junior ISAs
• Spouses can now inherit their deceased partner’s ISA benefits
• If an individual dies before the age of 75, they can now pass on their unused defined contribution pension savings free of Income Tax
• Beneficiaries of individuals who die under the age of 75 with a joint life or guaranteed term annuity can now receive any future payments from such policies free of Income Tax
• Employers will no longer have to pay employer NICs for employees under the age of 21
• Class 2 NICs for the self-employed can now be collected through Self Assessment
• The Employment Allowance extends to include people employing care and support workers to look after themselves or family members
• A new annual remittance basis charge of £90,000 is introduced for non-domiciled individuals who have been resident in the UK in at least 17 of the last 20 years, and the charge paid by non-domiciled individuals who have been resident in the UK in at least 12 of the last 14 years has increased from £50,000 to £60,000
• Non-UK resident individuals, trusts, personal representatives and narrowly controlled companies are now subject to Capital Gains Tax on gains accruing on the disposal of UK residential property
• Capital Gains Tax annual exemption amount has increased to £11,100
• The Capital Gains Tax charge on disposals of properties liable to ATED extends to cover residential properties worth £1 million – £2 million
• The requirement that 70% of Seed Enterprise Investment Scheme money must be spent before EIS or VCT funding can be raised is removed
• The Fuel Benefit Charge multiplier for both cars and vans increases by RPI
• The Van Benefit Charge increases by RPI. In 2015-16 the Van Benefit Charge rate paid by zero emission vans is 20% of the rate paid by conventionally fuelled vans
• Tax Credit payments are stopped in-year where, due to a change in circumstances, a claimant has already received their full annual entitlement

If you need more information regarding any of these changes please call.

The most generous tax allowance presently available to businesses that encourages direct investment in new plant, equipment and commercial vehicles, is the Annual Investment Allowance (AIA).

If you buy qualifying assets you can write off the expenditure against your taxable profits in the same accounting period. The present limit to this allowance is generous, £500,000.

The AIA is due to reduce from 1 January 2016, and unless Parliament set a new limit from that date, it will revert to a paltry £25,000.

Consequently, business readers who are contemplating an investment in new plant and equipment should take this AIA into account when making a decision to invest.

Entrepreneurs that stand to gain the greater advantage are the self-employed: sole traders, partnerships and LLPs, who may be faced with income charges at the 40% or 45% rates in the tax year 2015-16.

For incorporated businesses and self-employed traders paying tax at the standard rate of income tax, the tax savings will be limited to 20% of qualifying expenditure.

Certainly, we do not advise making investment decisions based solely on any tax advantages that may flow from the investment. Due regard should be taken of the effects on profitability, cash flow and future business growth.

If you would like to discuss how this relief could benefit your business, we would be happy to discuss your options. Planning for large investments is key. Do not make decisions without considering all the effects. Please call if you would like to discuss these matters in more detail.

All of this year’s (2015) winners are UK businesses leading the way in international trade, innovation and sustainable development in a broad range of sectors including car manufacturing, education, software design and fashion.

The Department for Business, Innovation and Skills (BIS) unveiled the 141 winners of the Queen’s Awards for Enterprise and 6 individual recipients of the Queen’s Award for Enterprise Promotion 21 April 2015.

The Queen’s Awards scheme is regarded as the most prestigious business awards in the country and 2015 marks its 50th anniversary.

This year, 105 businesses received awards for international trade; 24 for innovation and 12 for sustainable development. Two small companies, Wavestore Ltd and Hallmarq Veterinary Imaging Ltd, achieved double recognition, receiving awards for both innovation and international trade. In addition, 6 people who were nominated by their peers have been recognised for their efforts to encourage entrepreneurship in the UK with the Queen’s Award for Enterprise Promotion. Winners include entrepreneurs, a professor of creative entrepreneurship and the founder of the Creative Innovation Centre in Somerset.

Winners of the Queen’s Awards for Enterprise are visited by a Royal representative and are presented with a crystal bowl as a mark of their achievement. They are also invited to attend a reception at Buckingham Palace in July 2015. Businesses are also able to use the Queen’s Award emblem in advertising, marketing and on packaging for 5 years.

Firms that won a Queen’s Award for international trade showed they have benefited from substantial international growth in overseas earnings and commercial success within their sector.

Awards for innovation are given to businesses that can demonstrate that their innovative products or services are commercially successful.

Sustainable development winners have to show they are involved in activity that ensures a better quality of life for everyone, now and in the future.

The Queen’s Award for Enterprise Promotion is for individuals who have played an important role in promoting enterprise skills and supporting entrepreneurs.

Entries to the 2016 Awards close on Wednesday 30 September 2015. To apply and for more information, go to www.gov.uk/queens-awards-for-enterprise/overview