November 2018

tax tips & finance e-newsletter

In this issue

More money for NHS and an end to austerity?
Personal Allowance and Higher Rate Limit increased early
No changes in tax rates
IR35 'off-payroll' rules to be extended to private sector
Capital gains entrepreneurs’ relief changes
Company tax to reduce to 17%
Annual investment allowance increased to £1m
New capital allowance for commercial buildings
R&D tax credit restricted
VAT registration limit continues to be frozen
More rates relief for small businesses
Tax investigation service special offer
Getting clients to pay you on time
Co-working spaces - can they work for your firm?
New trainees

More money for NHS and an end to austerity?

As previously announced, these were the main themes of the Chancellor Phillip Hammond’s third budget but what we were waiting to hear was where the extra money was going to come from?

Had he found a “Magic Money Tree”, or would tax and borrowing have to increase?

We now know that the extra money will come from better than expected economic growth and consequential increased tax revenues. But there may have to be a Spring 2019 Budget if Brexit negotiations don’t go to plan.

Personal Allowance and Higher Rate Limit increased early

The Government’s manifesto pledge back in 2015 was that the personal allowance would rise to £12,500 in 2020 and the higher rate tax threshold to £50,000.

However, the Chancellor has decided to bring forward these increases one year early from 2019/20, taking an estimated 1 million taxpayers out of higher rate tax.

Note that up to 10% of the personal allowance (£1,250 from 6 April 2019) may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer. As announced last year, this transfer is now available on behalf of deceased spouses and civil partners.

No changes in tax rates

The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.

There had been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. Note that only the first £2,000 of dividend income is now tax free.

The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2019/20. Dividends on shares held within an ISA continue to be tax free.

The much rumoured further restriction in pension tax relief failed to materialise.

IR35 'off-payroll' rules to be extended to private sector

Very controversially, the Government have decided to extend the rules for personal service companies in the public sector to workers in the private sector from April 2020.

This follows a consultation in Summer 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation which has applied in the public sector since April 2017 seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company.

There will be further consultation on the detailed operation of the rules, and small businesses (yet to be defined) engaging such workers will be excluded.

This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to such workers and deduct tax and NICs.

Capital gains entrepreneurs’ relief changes

The Chancellor has announced that the minimum qualifying period for CGT entrepreneurs’ relief will be increased from 12 months to 24 months for disposals on or after 6 April 2019.

 There are further changes affecting shareholdings in personal companies. In addition to the individual holding 5% or more of the ordinary share capital and voting control they will also now be required to be entitled to 5% or more of the company’s distributable profits and assets in a winding up. As now the individual must also be an officer or employee of the company concerned; and the company must be a trading company or the holding company of a trading group.

Company tax to reduce to 17%

As previously announced the current 19% rate is scheduled to reduce to 17% from 1 April 2020.

Annual investment allowance increased to £1m 

The Annual Investment Allowance (AIA) which provides businesses with a 100% write off against profits when they acquire plant and machinery has been temporarily increased from £200,000 to £1 million for two years from 1 January 2019. This will again mean that the timing of expenditure will be critical. It may be advantageous to delay expenditure until after 1 January 2019 to get full benefit in certain circumstances.

However, the current enhanced capital allowance for energy efficient plant will be abolished from April 2020. A further change is that the writing down allowance for special rate pool equipment, broadly long-life assets and fixtures in buildings, is being reduced from 8% to 6% from April 2019.

New capital allowance for commercial buildings

A new 2% straight line tax deduction is being introduced for the cost of construction or renovation of commercial buildings and structures.

This tax break will apply to eligible construction costs incurred on or after budget day and will be available to commercial property landlords as well as trading businesses. The cost of the land is specifically excluded.

R&D tax credit restricted

The amount of repayable R&D tax credit for Small and Medium Sized Enterprises (SMEs) will again be restricted by the amount of the claimant company’s PAYE and NIC liability from April 2020.

The new limit will be set at three times the company’s total PAYE and National Insurance contribution (NICs) payment for the period.

VAT registration limit continues to be frozen

The VAT registration limit normally increases in line with inflation each year. However, it was announced last year that the limit would be frozen at £85,000 until 1 April 2020. It has now been announced that the limit will now remain at the same level until 2022. The deregistration limit will remain at £83,000.

More rates relief for small businesses

There has been much lobbying from the small business sector to reduce business rates to enable traditional retailers in particular to compete with internet traders.

The Chancellor has announced a one third reduction in business rates for small businesses with premises with a rateable value up to £51,000.

 A summary of this year’s Autumn Budget is now available. Please click the link below to download your copy.

Autumn Budget Summary

Tax investigation service special offer

Any individual or organisation is at risk of an investigation by HMRC.

Tax investigations can be costly and our expert support during this process is not covered by your usual accountancy fees. Investing a small amount into our Tax Investigation Service means that you will receive complete support if HMRC targets you, we will manage your case from start to finish, reducing stress and providing piece of mind. All at no extra charge.

The Tax Investigation Service scheme we offer our clients is due for renewal on 1st December 2018 and we are offering the first 50 new subscribers* to the service a 50% discount. Subscriptions must commence before the end of February 2019 to qualify. (*to either the Private Client Scheme or the Business Scheme, whichever option applies to you).

Please visit our website for further information on the Tax Investigation Service and how it can protect you.

Getting clients to pay you on time

You’ve done the work. You’ve invoiced the client 60 days ago. You are still waiting to get paid 30 days after payment was due. It’s time to chase for payment.

It’s never easy chasing clients for payment. However, this is business and you are entitled to be paid for the work that you have done. Unless your firm is a bank, you are not in the business of providing credit for your clients. So what should you do? 

Manage expectations

You should set out your invoicing and payment terms with your clients early on. If you are dealing with a new client, you should consider asking for 50% of the cost before you start doing work for them. Talking about these terms up front with your client will help to avoid any awkward conversations further down the line. 

Discounts and interest charges

Some firms offer clients a discount for settling invoices early. You could offer your clients a 5% discount if they pay an invoice within 10 working days. Conversely, you could charge clients 5% interest for payments that are over 60 days late. You can set this out in your payment terms at the very beginning of an interaction with a client. 

Regular reminders

You should create a standard email that you can send out to clients as a payment reminder. Your email should be firm but not aggressive. 

You should set out that payment is due and make it easy for your client to click a link through to an online payments page, should they want to settle their bill immediately. You could even set automated reminder emails that go out to clients 10, 20 and 30 days after the initial invoice date. 

Your clients are busy people. Sometimes they forget to process invoices and they might be a bit behind on their admin work. 

Sometimes a gentle nudge is all that is needed in order to ensure payment. You need to strike a balance between regular follow up and maintaining a good relationship with your clients, so that they come back to do business with you again in the future. Firm but fair is best.

Co-working spaces - can they work for your firm?

Co-working spaces were once the preserve of freelancers and creative types. Now medium to large sized businesses are getting in on the act too.

The modern workplace is evolving. First we had flexible working. Then we had remote working. Now we are seeing an increased demand for co-working spaces – workspaces which are shared by people who don’t all work for the same firm.

So why have co-working spaces become so popular? Technology has allowed people to become agile workers – who can now work from anywhere and at any time. These employees are no longer tied to a specific office. However, working remotely can lead to employees feeling isolated. Co-working spaces allow remote workers to engage in a community, without having to commute long distances into city centre offices. This has led to huge growth in co-working businesses such as WeWork, LABS, CoWorker and many others.

The cost of using a co-working space is often cheaper than commuting into a major city every day. Outside of the cities, it is possible to subscribe to a co-working space costing anything from £100 up to £1,000 per month (depending on the facilities that you require). Most co-working spaces offer anything from hot desks, all the way up to dedicated desks, private offices, meeting rooms, etc. Many co-working spaces also offer regular social events for members, such as after work drinks, etc.

If your business is prepared to embrace agile working, you can benefit from happier staff who can work from a co-working environment which has fast Wi-Fi and all of the business amenities they need to have. In return, your employees can cut down on commuting and enjoy a better quality of life, on their own terms.

We all know that happier employees tend to stick around, so co-working spaces could provide an opportunity for you to retain good people. In addition, you can reduce costs - if more of your people are working remotely, you need less office space. Depending on the type of business that you run, and where your people are based versus the office, co-working spaces can offer an attractive and cost-effective option.

New Trainees

In September we welcomed five new trainees to the firm.

Harry Turner graduated with a BSc (Hons) in Business & Management (Accounting) at Brunel University and is studying to become a Chartered Accountant (ACA) whilst working for Partner Andrew Robinson.

Jake Bush and Rubie Turner joined our Eastbourne office whilst Joe de Vivo and Lauren Maclaren are at our office in Hove; all four trainees are studying towards their Accounting Technician qualification (AAT).

Senior Partner Anthony Smith comments “Our biggest asset as a firm is our staff, and we are always happy to invest in their training and development so that we can continue to provide the very best service to our clients. We wish the new trainees every success with their studies.”