Business Advice

Hanley & Co selected to join ‘Handpicked Accountants’

Hanley & Co Selected As One Of The UK’s Top Accountants

We are delighted to announce that Hanley & Co have been selected to join Handpicked Accountants.

Recently launched by the renowned Begbies Traynor Group, Handpicked Accountants is an online searchable database that aims to connect company directors and small business owners with accountancy firms that they know they can trust. Rather than having to take ‘pot-luck’ with one of the approximately 320,000 accountants in the UK, Handpicked Accountants features only firms which have been thoroughly vetted, often through years of working with the Begbies Traynor Group themselves.

David Tattersall, Head of Client Relations at Handpicked Accountants, said, “Hanley & Co deserves their place in our select list of only about 1,000 Handpicked Accountants, as a result of their dedication to their clients and their emphasis on providing an exceptional level of service at an up-front price. Too many business owners come to us looking for a new accountant after having been surprised by extra charges and unexpected bills. However we can guarantee that this will never happen with Hanley & Co and so we are delighted to be able to welcome them to the Handpicked Accountants family.”

Dean Logan, Partner at Hanley & Co, replied, “Being included in the Handpicked Accountants list is a real honour for us. We have always strived to provide our clients with fair, open and honest advice that they can trust, and our client testimonials show how many happy clients that we have. Whether it is providing accountancy, auditing, bookkeeping, tax advice, support for business start-ups, VAT, payroll and CIS or company formations and services, we ensure that we provide the best possible service for our clients all for a fair and upfront price. Hopefully via our inclusion on the Handpicked Accountants website we will be able to offer this to many new clients too.”

You can view our Manchester listing here and our Blackpool listing here

This month’s Q&As

Q. My wife has a part time job but doesn’t earn enough to pay tax. Can she get tax relief on contributions made to a pension scheme?

A. Yes, even if you are not earning enough to pay income tax, you still qualify to have tax relief added to any contributions you make to a pension plan. However, the maximum you can pay in is £2,880 a year, or 100% of your earnings, subject to the ‘annual allowance’ restrictions.

Tax relief is added to the contributions at the basic rate of tax (currently 20%), so if you pay in £2,880 net, tax relief of £720 will be added, meaning that the gross contribution into the pension will be £3,600 (£2,880 x 100/80).

Q. I am a qualified doctor and pathologist. I have recently registered for VAT as my turnover has exceeded the current VAT registration limits. In addition to my regular doctor’s practice, which I understand is still exempt for VAT, I also write medical reports for insurance companies. I understand that this service is standard rated. However, I have also recently been requested to carry out post mortems. I am statutorily obliged to carry out this work, but I am paid for it. Should I charge VAT on my invoices for this service?

A. As you state, some services will be taxable or exempt, depending on their primary purpose. This is particularly the case in the area of medical reports and certificates, and in these cases, it is necessary to establish their principal purpose, before liability can be determined. Where the service is principally aimed at the protection, maintenance or restoration of health of the person concerned, the supply is exempt. However, where a medical report is done solely to provide a third party with a necessary element for taking a decision for insurance or legal purposes, the supply is taxable at the standard rate.

Where a doctor is compelled by statute to perform a statutory service and charges a fee for it then the supply is outside the scope of VAT (see VAT Notice 701/57, para 4.13). Under Section 19 of the Coroners Act 1998 a coroner can appoint a doctor (pathologist) to carry out a post mortem if necessary. As this is a statutory requirement and the doctor must provide the service, any payment received will be outside the scope.

Q. I started my own business as a sole trader on 1 December 2016. Although it has been quite a slow start, my profits are slowly going up and I am hopeful that they will continue to rise steadily over the next few years. Should I use 30 November or the tax year-end as my accounting year-end?

A. As a general rule of thumb, choosing a year-end earlier in the year, will generally give a business longer to pay its annual tax bill. This, in turn, can help considerably with the business cash-flow.

Taxpayers are generally required to make two equal payments of their income tax liabilities (including any Class 2 and Class 4 NIC liability) on account:

– by 31 January in the tax year; and
– by 31 July following the tax year,

based on the total income tax payable directly in the previous tax year.

The balance, together with any capital gains tax, is normally payable (or repayable) by 31 January after the tax year.

This Month’s Q&As

Q. Can I give my house to my children and continue to live in it and avoid inheritance tax?

A. It may be possible if you pay a full market rent for your home, but if you do this, then your children will have to pay income tax on the rent they receive. Capital gains tax may also be payable at some time in the future if they sell the house. The new inheritance tax residence nil rate band (RNRB), which is being phased in from April 2017 over a 4-year period, is designed to help people in your position to pass on the family home to children or grand- children, tax-free after their death. HMRC’s guidance Inheritance tax: additional threshold (RNRB) provides further information. Always seek professional advice before entering into any arrangement where the main purpose, or one of the main purposes, is to obtain a tax advantage.

Q. I am thinking of selling a property that I have owned and rented out for the last ten years, and once it is sold, I will reinvest the proceeds in another property. Will I have to pay capital gains tax on the proceeds from the sale even if all the money is reinvested in another property that is also let?

A. Yes, you will be liable to capital gains tax on the gain arising on the sale, even though you will be reinvesting the money in another property that is also let. Rollover relief is available for residential investment property only in relation to qualifying furnished holiday lettings, and for compulsory purchases.

Q. I lent my brother some money, which I borrowed from my company, for him to use in his business. He is paying it back in monthly instalments over three years. What are the tax implications of this loan?

A. I presume that you are a director and a substantial shareholder of the limited company. I also presume that the company lent the money on an interest-free basis.

The tax implications for the company are that the loan is deemed to have been made to an associate of a participator in the company, and as such, it will be caught by what are commonly referred to as the ‘section 455 rules’. Broadly, these rules mean that the company will have to pay tax at 32.5% on the amount of the loan outstanding nine months after the accounting year end of the company. When the loan has subsequently been repaid to the company, HMRC will refund the tax paid.

There is an exception to this, namely where a loan does not exceed £15,000, but only when the shareholder does not own more than 5% of the shares.

If a relative of an employee receives an interest-free loan from an employer, this will be a benefit-in-kind for the employee. Interest at the ‘official rate’ (currently 3%) is calculated, and this deemed interest is subject to tax. However, there are exceptions to this tax charge where:

– the loan is a ‘qualifying loan’;
– a qualifying or non-qualifying loan is less than £10,000; and
– the employee can show that they received no benefit from the loan to the relative.

As your brother used the loan for business purposes, it should be a qualifying loan because ‘the interest would be deductible in computing the borrower’s profit from a trade’ (HMRC Employment Income Manual, paragraph EIM26136). With regard to the ‘no benefit received from a loan to a relative’, HMRC are generally reluctant to apply this when the employee is a director who controls the company.

Working From Home

Over recent years, it has become increasingly popular for employers to allow their employees to work from home, and in doing so, pay an amount to cover any additional household costs incurred. What are the tax implications of such expenses for the employee?

Broadly, no tax liability will arise where an employer makes a payment to an employee for reasonable additional household expenses, which the employee incurs in carrying out duties of the employment at home under ‘homeworking arrangements’.

‘Homeworking arrangements’ are arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home. There is no requirement for any part of the employee’s home to be used exclusively for the purposes of the employment – in fact, if any part of the home is used exclusively for work, problems could arise on the future sale of the house as part of the capital gains tax exemption on private residences may be lost.

HMRC have stated that they will accept that homeworking arrangements exist where:

– there are arrangements between the employer and the employee; and
– the employee works at home regularly under those arrangements.

The HMRC guidance also advises that:

‘the arrangements need not be in writing but usually will be. They do not need to apply to all employees. The exemption does not apply where an employee works at home informally and not by arrangement with the employer. For example, it will not apply where an employee simply takes work home in the evenings. It applies where an employee works at home by arrangement with the employer instead of working on the employer’s premises.’

HMRC accept that the ‘regularly’ condition is met if working at home is frequent or follows a pattern. The fact that the days spent at home vary from week to week is not a bar to claiming the exemption.

‘Household expenses’ are defined as expenses connected with the day-to-day running of the employee’s home. The exemption applies to additional household expenses, and HMRC have given the following guidance:

‘Typically this will include the additional costs of heating and lighting the work area or the metered cost of increased water use. There might also be increased charges for Internet access, home contents insurance or business telephone calls. Where working at home leads to a liability for business rates the additional cost incurred can also be included.

The additional household costs must be reasonable and must be incurred in carrying out the duties. This excludes costs that would be the same whether or not the employee works at home, for example mortgage interest, rent, council tax or water rates. It also excludes expenses that put the employee into a position to work at home, for example building alterations or the cost of furniture or office equipment.’

Amount of exemption

To minimise the need for record-keeping, employers can pay up to £4 per week (£208 per year) without supporting evidence of the costs the employee has incurred. If an employer pays more than that amount, the exemption will still be available but the employer must provide supporting evidence that the payment is wholly in respect of additional household expenses incurred by the employee in carrying out his duties at home.

If an employer wishes to pay more than the guideline rate per week tax-free, then it is recommended that the employer should agree in advance with HMRC a scale rate. Failing that, records will need to be kept of the actual additional costs incurred by each employee.

Great childcare schemes

The government has some great schemes to help parents balance the very significant cost of childcare with the benefits of being in work.

Below are details of the new ‘tax free childcare’ scheme and also of the free nursery hours available for 3-4 year old.  Parents will be able to apply for both these schemes in one go through the government’s new digital childcare service. Eligible parents can benefit from both tax-free childcare and 30 hours free childcare at the same time.

Please do contact us for advice on your own specific circumstances – we’re here to help!

Tax free childcare

The long-awaited tax-free childcare scheme launched on 28 April 2017 and will be rolled out during the course of the year. In conjunction with this, the government’s new Childcare Choices website is now operative, allowing parents to find out about available support. The website includes a childcare calculator for parents to compare all the government’s childcare offers and check what works best for their families, including the new 30-hour free childcare offer, tax-free childcare or universal credit. Through the website, parents can also pre-register for email alerts that will notify them when they can apply, as well as providing details of existing government childcare offers.

It is currently estimated that some two million working families will be eligible for tax-free childcare. It will be gradually rolled out, with parents of children under two invited to enter the scheme first. By the end of the year, all eligible parents will be able to receive government top-ups of £2 for every £8 that a parent pays into their tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children). This will be open to all working parents across the UK with children under 12, or under 17 if disabled.

30 hours free childcare

From September 2017, the new 30 hours free childcare offer for working parents of three and four year olds in England will double the current 15 hours of free childcare currently available, saving eligible working families up to £5,000 a year.

Eligible parents will be able to apply online through the childcare service. They will receive a code – this will allow parents to arrange their childcare place ahead of September 2017. Parents can take their code to their provider or council, along with their National Insurance Number and child’s date of birth. Their provider or council will check the code is authentic and allocate them a free childcare place.

We are now a certified Quickbooks Pro Advisor!

We are delighted to announce we are now a certified Quickbooks Pro Advisor.  This means we can offer any client wanting to complete their own bookkeeping a choice of two award winning online bookkeeping solutions – Kashflow and Quickbooks.

We have invested in extensive training with both providers, so that we are in a position to:-

  • advise on which solution suits your business requirements best
  • set up the system (including your bespoke invoices and reports)
  • provide excellent initial training to empower you to use the system effectively
  • support you at any time during the year to answer queries
  • help you easily transition to the Making Tax Digital (MTD) regime, when it becomes relevant to you in a few years

Both solutions take the hassle out of your bookkeeping – you can access the system on any device (laptop, PC, phone, tablet), so you can update your transactions, prepare VAT Returns anywhere anytime.

One particular function which our clients really appreciate is the ability to import your bank transactions directly from your bank to the system – no more adding bank receipts and payments manually from your statements line by line!  And you can teach the system how to automatically classify your regular transactions.  For example, United Utilities payments can be automatically allocated to ‘water’.

Kashflow and Quickbooks can truly save you hours of time, enabling you to concentrate on running your business.

If you are looking to change accountant but you already use Kashflow or Quickbooks (or any other online solution) with your existing advisor, please do contact us for your FREE initial no obligation consultation and rest assured it is very easy to provide us with access to the system instead.

KASHFLOW LOGO ON WHITE21 150x150 - We are now a certified Quickbooks Pro Advisor!bronze 150x150 - We are now a certified Quickbooks Pro Advisor!

Nice article clarifying VAT on disbursements

http://www.accountingweb.co.uk/tax/business-tax/vat-dealing-with-disbursements?utm_content=bufferfc244&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer