Entries Tagged 'Business news' ↓

Business Records Check

HMRC has confirmed that they now expect to check the business records of a reduced number of businesses as part of their recent Business Records Check (BRC) initiative.

The new annual target is 20,000 visits, down from the original 50,000.  An additional 90 staff have been recruited to the initial headcount of 30 in order to facilitate these visits.

HMRC have confirmed that they will not, initially, be charging fines to businesses who don’t maintain adequate records.  However, this will change in the near future so all businesses should be ensuring that their paperwork is now up to date.

Autoclenz – employment status court case

This recent case has moved the goalposts slightly in respect of employment status/IR35 scenarios.

The contracts in question contained the usual substitution and mutuality of obligations clauses which often point away from employment/IR35.  However, the Supreme Court decided that the reality of the situation over-rode these contracts.  The reality was that the workers had to do the work personally and could not send substitutes.

The court also said that the expectations of the parties need to be taken into account; no-one expected a substitute to be used.  Also that the bargaining power of the parties should be considered; i.e. was the contract a “take it or leave it” contract?

No doubt, the Taxman will be trying to turn this case to his advantage in the near future so beware out there!

Emergency Budget 2010

Below is a summary of the Budget changes relevant to small UK businesses and their owners.

Corporation tax

  • Small company rate to reduce to 20% from April 2011
  • Main company rate to fall to 27% from April 2011 followed by 1% annual reductions over the next 3 years to reach 24% by April 2014


  • Standard rate of VAT to increase to 20% from 4 Jan 2011
  • Sectoral rates for the Flat Rate scheme will increase at the same time as published here

Capital gains tax

  • Annual exemption of £10,100 is unchanged
  • Tax rate for basic rate payers remains at 18%
  • Tax rate for higher rate taxpayers increases to 28% from midnight 22 June 2010
  • 10% rate for entrepreneurs extended to £5m of gains in lifetime

Income tax

  • £1,000 increase in Personal Allowance for tax to £7,475 with effect from April 2011
  • However, the higher tax/NI rates will kick in sooner to offset the Personal Allowance increase for higher earners

National Insurance

  • As previoulsy announced, NI rates will increase by 1% from April 2011
  • The threshold at which NI becomes payable for employers will increase to £131 per week from April 2011
  • Small businesses, in certain areas, set up over the next 3 years will be exempt from the first £5k of employer’s NI on up to 10 employees’ wages

Capital expenditure

  • The maximum expenditure for immediate tax relief is reduced from £100k to £25k pa with effect from April 2012
  • Other expenditure attracts reduced tax relief of 18% or 8% (previously 20% and 10%) for accounting periods ending April 2012 onwards

Furnished holiday lets

  • No changes immediately so the generous tax reliefs continue for UK and EEA properties
  • However, the government has announced a tightening of the rules from April 20011 – more details will be published in due course

Pre Budget Report 2009

Today’s statement by Alistair Darling was arguably more of a pre-election manifesto than announcing any moves to aid the economic recovery.  However, here is the good and bad news for small businesses:

Good News

  • Small company tax rate to remain at 21% rather than increase to the previously announced 22%.
  • The tax payment service enabling struggling businesses to spread payment of their tax bills is being extended.
  • No changes to the capital gains tax rates (suprisingly).
  • Various minor tax breaks for electric cars and vans.

Bad News

  • National Insurance is increasing by 1% from April 2011 (a 0.5% increase had previously been announced).  This affects employees, employers and the self-employed where earnings exceed £20k pa.
  • The rate of VAT will revert to 17.5% on 1 January 2010.  The Flat Rate percentages will also increase by varying amounts.
  • A 50% supertax will be charged on bank bonuses in excess of £25k per employe (some may argue this should be a Good News item!).
  • Company cars will become slightly more expensive as the benefit bands have been shifted down by 5g/km of Co2.
  • The stamp duty exemption on the purchase of most residential properties has been reduced from £175k to £125k.
  • A telephone landline tax of 50p per month per line is being introduced from 1 October 2010 to pay for faster broadband speeds.

Further details on the less common taxes can be found here and changes announced in the April 2009 Budget can be found here.

New penalty regime for tax errors

The new penalty regime for errors on tax returns commenced on 1 April 2009.  Mistakes on returns will be penalised depending on the behaviour of the taxpayer which led to the inaccuracy.

Innocent mistake

Where the taxpayer has taken reasonable care to ensure that his return does not understate the tax due, there will be no penalty. It would seem that HMRC does now understand that “people do make mistakes” but that provided everyone takes reasonable care, an innocent mistake will not be punished.

Lack of reasonable care

Where the error arises through carelessness, and the taxpayer did not take sufficient care over his return he will be liable to a penalty of 30% of the tax understated. Where the taxpayer comes forward and notifies HMRC of the error it is possible to significantly reduce the rate of penalty. Depending on the circumstances the penalty can be reduced to nil in the case of an unprompted disclosure, and 15% when the disclosure was prompted.


Where the taxpayer deliberately understated his liability the penalties range from 70% for deliberate understatements to 100% for deliberate understatements that have been concealed. Again, larger reductions are available for unprompted full disclosure rather than after a request for information by HMRC.

What is reasonable when taking care?

All taxpayers are expected to keep sufficient records on which to base their return, and sufficient to ensure that any return prepared is correct. Beyond that, taxpayers should seek advice if they are unsure about something and if they remain unsure should disclose the uncertainty on their return.

Taxpayers with an accountant

When a taxpayer has an accountant there is in theory more scope for error in terms of a breakdown in communication between the taxpayer and the accountant. There will be no penalty for careless error when the return is dealt with by an accountant if HMRC is satisfied that the taxpayer took reasonable care but the accountant just made a silly mistake.

Budget Day 2009

The 2009 Budget will be on 22 April 2009.  Budgets are usually given in March but it has been delayed this year to fall after the G20 world leaders conference when the global economic crisis will be discussed.

This does mean of course, that some measures which have effect from 6 April 2009 will not be announced until 2 weeks after the event, but I guess we will just have to mind read the Government….

Loan guarantee scheme launched by Government

Below are details of the Government’s newly launched business loan guarantee scheme which is hoped will encourage bank to lend more to small and medium sized businesses.

Working Capital Scheme

  • A part-guarantee given to £20bn of short term loans, the Government will guarantee 50% of the loan, amounting to a total commitment of £10bn.
  • Open to companies with turnovers up to £500m.
  • Can be used both to increase existing and establish new loan agreements.
  • The first £1bn of guarantees should be available by 1 March 2009, with the remainder until 31 March 2011.
  • Banks will submit loan details to the Department for Business, Enterprise and Regulatory Reform (BERR) on a “portfolio” basis. BERR will assess the risk of the portfolio and charge the bank a fee for the guarantee – the higher the risk, the higher the fee. This fee is likely to be passed onto the company borrowing the money.
  • Declarations of interest have been received from Barclays, HSBC, Lloyds TSB and RBS.

Enterprise Finance Guarantee Scheme

  • A part-guarantee over £1.3bn of new lending, the government will guarantee 75% of the loan.
  • Companies with turnovers up to £25m can apply for loans between £1,000 and £1m to be repaid over a maximum of 10 years.
  • Existing overdrafts can be converted to loans, which will allow businesses to use their overdraft facilities to fund working capital.
  • The scheme will be open until March 2010.
  • Businesses in the agriculture, fisheries, coal, synthetic fibres and yarns, motor vehicles, shipbuilding, steel and transport sectors are ineligible.
  • The Enterprise Finance Guarantee Scheme will initially be available through Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS/Natwest and Northern Bank.

Capital for Enterprise Fund

  • £75m fund, with £50m from the Government and £25m from Barclays, HSBC, Lloyds TSB and RBS.
  • This is designed as a long-term solution for businesses which have exhausted all other forms of funding.
  • Businesses will be able to sell their debt for equity – effectively selling part of the business to relieve the debt burden.
  • Companies with turnovers up to £11.2m and fewer than 250 employees will be able to exchange between £250,000 and £2m of debt for equity.
  • Businesses in Northern Ireland, Scotland or Wales are not eligible.

Pre Budget Report 2008 – spend now pay later?

Alistair Darling today announced some significant tax changes in an attempt to mitigate the UK’s forthcoming recession.  There were short-term tax cuts but medium-term tax increases.

Good news:

  • VAT standard rate is temporarily cut from 17.5% to 15% from 1 Dec 2008 to 31 Dec 2009
  • Tax bills can be paid by instalments if businesses are experiencing cash flow problems
  • Small company tax rate has been held at 21% until 1 April 2010 when it is scheduled to increase to 22%
  • Businesses making losses in 2008/09 can offset them against profits of the previous 3 years subject to a £50k limit
  • Personal allowance (the tax free income threshold) is to be increased to £6,475 and the basic rate income tax limit increased to £37,400 from 6 Apr 2009
  • Income shifting legislation for husband and wife companies to be deferred another 12 months

Bad news:

  • The VAT flate rate percentages have typically been reduced by only 1% or 1.5% so these businesses may lose out
  • National Insurance will be increased by 0.5% for the self employed, employees and employers from 6 April 2011
  • Top rate of income tax to increase to 45% from 6 April 2011 if you earn in excess of £150k pa
  • Personal allowance to be reduced from 6 April 2010 for those earning in excess of £100k pa

Further details of rates can be found at the HMRC website: http://www.hm-treasury.gov.uk/prebud_pbr08_press02.htm

Are the funds in my company bank account safe?

This is a question that we have been getting asked alot recently.

The good news is that a UK based small business account is almost certainly covered to the same extent as the personal bank account guarantee which currently covers deposits of up to £35k (soon to be increased to £50k ).  This is because a business account is covered by the small business guarantee as long as the business qualifies for two of the following three

- Your annual turnover is below £6.5m
- Your balance sheet total is below £3.26m
- You have less than 50 employees

It is possible to get more protection if you spread your funds around several banks.  However, two banks that are owned by one parent company, where only the parent is authorised by the FSA, will only be covered for £35k over all of it’s group bank accounts.

Therefore ensure that you spread your deposits across different UK banks with separate FSA registrations. For example, having one account with Barclays and another one with HSBC each holding £35k of your savings, will enable you to benefit from a guarantee on £70k.

Self employed working from home

New guidance has been issued by the Taxman on what expenses can be claimed by the self employed when they work from home.

Allowable pro-rated costs:

  • mortgage interest;
  • council tax;
  • cleaning costs;
  • phone line & broadband rental;
  • insurance;
  • repairs & maintenance.

Pro-rating costs involves calculating the % of your home used for the business and the % of time per day each room is used for business purposes.