December 2019

tax tips & finance e-newsletter

In this issue

Election tax proposals

Gifts to charity

Key dates for January 2020

The future of work

Reduce debtor days to improve cash flow

Local charity support

Christmas opening hours

Election tax proposals

MORE MONEY FOR NHS?

The various political parties have all made bold promises in the run up to the General Election about increased spending if elected, particularly extra money for the NHS. Although many of the spending pledges will be funded out of increased borrowing, the parties have assumed that they can persuade voters that extra spending on the NHS should come from general taxation.

The Liberal Democrats policy would be to increase the rate of income tax by 1% to raise £35 billion a year for the NHS and social care. The Conservative and Labour parties propose to provide extra money for the NHS from corporation tax changes.

BORIS JOHNSON TO DELAY 17% RATE OF CORPORATION TAX

Corporation tax is scheduled to be reduced from 19% to 17% from 1 April 2020.

However, in a speech to the CBI on 18 November Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for the NHS.

Despite Jeremy Corbyn telling the CBI that the Labour party is “not anti-business” the party have previously announced that they would reverse the recent cuts in corporation tax. Note that the rate of corporation tax was 28% back in 2010 at the end of the last Labour government.

MORE MONEY FOR SOCIAL CARE?

In every General Election since 1997 there have been pledges by the various political parties to resolve the funding of care for the elderly in the UK but yet nothing has happened. It even sparked a dramatic U-Turn by Theresa May in 2015 with her proposal for a so-called “dementia tax”. With the care system in crisis it will be interesting to see what the different political manifestos promise to solve the problem.

Although not strictly a tax matter, for many families funding care fees for the elderly is a bigger issue than inheritance tax (IHT). The current rules in England and Wales require the family to make a contribution to care fees where the person’s assets exceed £23,250, including the value of the family home.

The normal IHT planning strategy of giving wealth away and surviving for seven years does not necessarily work as the social care rules are based on the concept of “deliberate deprival” of the estate.

If the local authority consider that the transfer of assets was done deliberately to deprive the estate of assets to avoid paying care fees, then the transfer is ineffective.

Gifts to charity

Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.

For example where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self assessment, reducing the net cost of their donation to £15.

Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.

Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell the donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations.

It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.

Key dates for January 2020

DateWhat's Due
1/1/20Corporation tax for year to 31/03/2019 unless quarterly instalments apply
31/1/20Deadline for filing 2018/19 self assessment tax return online and paying your outstanding tax for 2018/19 and first payment on account of 2019/20 tax.

The future of work

There is a lot of jargon out there around “the future of work”. What does it really mean for businesses?

There is a lot of buzz around trends like artificial intelligence (AI), machine learning, blockchain, remote working, agile working, augmented reality (AR) and various other new concepts. As technology improves we have new opportunities to automate tasks.

If we leverage new technology effectively, it will free us up to focus on other tasks. Understanding the future of work involves understanding how automation will play out and how that will affect the way we work in the years to come. There are two levels of automation at play. Assisted Intelligence, where systems and technology help us to perform a task. A good example is how GPS helps us to navigate to a destination. Autonomous Intelligence is where the technology takes the task off our hands entirely. For example - a driverless car, which navigates itself to its destination without any input from a human driver.

In any business, some tasks are completed by people and some by machines / technology. The future of work is concerned with the ever-increasing amount of work that needs to be done and the fact that work is becoming more complex. For example, due to increasing levels of regulation, businesses need to comply with increasingly complex rules such as GDPR or changes to taxation. Rather than hire more and more people, which is expensive, businesses need to leverage technology in order to get everything done, while still managing costs.

So, the future of work is all about machines and technology taking repetitive tasks off our hands so that we are freed up to do the work that machines aren’t good at. This includes leadership, creativity, innovation and collaboration. In order to make this transition successfully, businesses need to become learning organisations. In a learning organisation, the firm needs to focus on nurturing talent and developing new skillsets in order to create a more successful business. The future of work looks set to be interesting, challenging and full of opportunity, for those who embrace change.

Reduce debtor days to improve cash flow

Cash flow is king in any business. Yet cash flow is one of the areas that many businesses struggle to manage.

Customers are reluctant to part with their money, even if it's to pay for your goods or services. As such, it can take a while for them to pay their invoices.

While longer debtor days might not be a big issue for huge international corporations, for the rest of us, it can be a very real source of stress. You need your customers to pay you as quickly as possible so you can continue to run your business, so it's easy to find yourself working extra hours, chasing up late-paying clients. Here are a few tips to help you to reduce your debtor days.

Be clear and concise
When creating an invoice, think about your messaging. Is the due date easy to see on the page, does your invoice state exactly how much is payable and have you clearly outlined the various payment options that you accept (such as bank transfers, cash, cheque, etc.) ? Options such as “pay now”, “pay by instalments” or “pay on the due date” should be clearly set out.

Offer incentives
Sometimes offering a small discount can motivate your clients to pay on time. Offering say, 5% off the total bill for clients who pay within 2 weeks of the invoice date can help a business to get cash in quicker. Setting this type of incentive out at the beginning of a client relationship can go down well as clients can see the early payment discount as a “value add”.

Charge fees for late payment
Incentivise customers to pay you on time by charging a fee for late payments. If you communicate the terms and conditions around late fees clearly, clients will not be surprised if they are charged for late payment.

If you are going to charge clients for late payment, it is usually effective to give some sort of warning. It may be helpful to send clients an email saying that “payment is due in 10 days time and if it isn’t received, a late payment fee will be applied.” This gives the client an opportunity to respond.

Embrace technology
There are a vast array of systems available to help businesses to track invoices, monitor payments and manage clients who have missed payment deadlines. With an automated accounts receivable system, you can keep track of the status of each invoice, who has paid and what is outstanding. You can set up automatic reminders at crucial moments in the payment cycle and significantly reduce your administration time.

By implementing the above strategies, you can reduce debtor days in your business and ensure that you are getting cash in as quickly as possible.

If you need assistance to set up these systems in Xero, please speak to your usual contact at Humphrey & Co.

Local charity support

During 2019 we have supported The Juvenile Diabetes Research Foundation (JDRF) and are very appreciative to all members of our staff who have helped to raise money for this very worthy cause. In total we have raised in excess of £5,200.

For more information visit: www.jdrf.org.uk

The firm is pleased to announce that for 2020 we will be supporting not one but two charities. The Eastbourne Foodbank and Hangleton and West Blatchington Foodbank are local to our offices in Eastbourne and Hove. Food banks are here to support those in the local community who do not have sufficient funds to buy their own food and essential toiletries, whilst also offering advice and support groups to those in need.

We will be supporting both charities by collecting food to donate throughout the year and also donating the money raised through various fundraising activities. Our first donation will be £500 to each charity in lieu of Christmas Cards.

For more information visit:
www.eastbourne.foodbank.org.uk and www.hangletonfoodbank.org

We will update you on the funds raised during 2020 in future news updates.

Christmas opening hours

We will close at 11.30am on Monday, 23 December 2019

Monday

23 December

Closed from 11.30am

Tuesday

24 December

Closed

Wednesday

25 December

Closed

Thursday

26 December

Closed

Friday

27 December

Closed

Monday

30 December

Open

Tuesday

31 December

Open

Wednesday

1 January

Closed

Thursday

2 January

Open

On behalf of everyone at Humphrey & Co we would like to wish all of our readers a very Merry Christmas and a happy, healthy and prosperous 2020.