Christmas party expenses: Tiny Tim can have his turkey, after all

If only Ebeneezer Scrooge had known a bit more about tax exemptions. These days, the cold-hearted miser who only begrudgingly closes his office on Christmas Day could have thrown his employees a proper knees-up at reduced cost thanks to an HMRC corporate tax relief exemption for festive entertaining costs. Not so much “Bah! Humbug!” as “Rockin’ around the Christmas tree!!”

 

What is the exemption?

The government offers a tax exemption for employers organising social functions and parties. The exemption runs on an annual basis, so although Christmas parties are often the biggest social events for companies, the exemption can be used for other festivities such as summer parties.

Although the relief is often described as an allowance, it is in fact a tax relief limit of £150 per employee. This allowance also applies to the smallest Limited Companies, so even if you’re a one-person band, you can still let your hair down and join in with the festivities. You worked hard in 2018, so you deserve to celebrate!

 

Qualifying for the exemption

There are certain rules that apply to the exemption. Let’s have a look at the requirements:

    • An annual event

The event must be something that happens once a year on a recurring basis. This means Christmas or summer parties are included in the definition, but a one-off such as an anniversary celebration is not.

  • In one location, open to all

 

The event must be open to all employees. If there are multiple locations within your organisation, an event at a single, central location will still be still exempt so long as it is open to everyone. Separate parties for different teams or departments are also permissible.

  • Costing no more than £150 per head

 

The combined cost of all events occurring during one year must cost no more than £150 per person. Where the cost goes over £150 then the functions that can best be designated to use the exemption will be exempt, while the other events will be taxable. The £150 limit includes VAT, transport costs and accommodation costs. The total expenditure is divided by the number of guests to calculate the cost per person.

  • Celebrating with non-employees

 

The event is required to be open to all directors and staff, but the exemption also applies to guests such as partners, family and children of directors and employees. For smaller companies, this means you can host a Christmas party where employees are in the minority and still be within the rules.If you exceed the £150 per person expenditure limit, the exemption will no longer apply and the full amount spent on the party will be taxed. Accordingly, it is wise to be careful about expenditure and check with an accountant to make sure you stay within the rules.

 

Cheers to the taxman

There are not many occasions when we feel warmth towards HMRC, but a Christmas party funded through tax exemptions is possibly one of those times. As a Limited Company Director, whatever you decide to do to celebrate the season – a full-blown party, a few drinks or a slap-up feast somewhere special – don’t forget to raise a glass to the taxman!

 

If you’re an Intouch client and you need help calculating your annual events expenses, or with any other tax matter, just contact your Personal Accountant.

If you’re not already with us and would like to find out more about how Intouch can help you contract through your Limited Company, just contact us on 01202 901 385.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

All you need to know about Making Tax Digital

If you’re a regular to the Intouch blog, you might have read our recent article on what the Budget means for contractors. One topic we didn’t tackle in depth was the introduction of the government’s Making Tax Digital (MTD) programme from April 2019, which is going to affect VAT registered contractors with a taxable turnover above the threshold.

 

As the government websites states, the MTD initiative forms a key part of its plans to ‘make it easier for individuals and businesses to get their tax right and keep on top of their affairs.’ Think you’ll be affected by the change? If so, here’s some information you might find useful:

 

Why the change?

Along with simplifying processes for individuals and businesses, the government wants HMRC to be one of the world’s most advanced tax administrations. MTD will lead to fundamental changes in our tax system, with the aim of reducing errors and making it more effective and efficient.

 

Who does it apply to?

The MTD scheme will apply to companies, LLPs, unincorporated businesses and charities that are VAT registered and have a taxable turnover above the VAT registration threshold, which currently stands at £85,000 per annum. If that’s you, you’ll have to store your tax records digitally (for VAT purposes only) and send HMRC VAT return information digitally via MTD ‘functional compatible software.’

Before the Budget, many people thought the Chancellor was going to slash the registration threshold to £43,000. This would have seen hundreds of thousands more small companies falling into the MTD for VAT scheme. However, Philip Hammond confirmed during his speech that the £85,000 threshold will remain in place until at least April 2022.

If you’re VAT registered but your taxable turnover falls below the threshold, it’s up to you whether or not to opt in and file your information digitally.

 

When exactly does it come into effect?

MTD for VAT will officially apply to VAT return periods beginning on or after 1 April next year. This date has been pushed back until October 2019 for a minority of small businesses with unique requirements.

 

What records should be digital?

HMRC has listed the details that should be stored digitally in your so-called ‘electronic account.’ These include:

  • Company name, address, VAT registration number and any accounting schemes you use
  • Time of supply (the date you must declare output tax on)
  • Value of supply (net value excluding VAT)
  • Rate of VAT charged

 

It’s more important than ever to make sure your digital records are correct, ahead of the changes that come into force in less than six months’ time.

There’s a lot to remember and prepare for, so if you’re a Limited Company contractor who’d rather relax and forget about MTD, why not get in touch with Intouch about becoming one of our clients? We’ll do it all for you, so you can concentrate on what you do best – providing a great service to your clients and earning money!

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

If you’re in the process of finding a suitable accountant, do you know what to look out for exactly? Our infographic helps you ask the right questions…

 

 

All you need to know about submitting your Self Assessment tax return

Many people don’t like to hear the ‘C’ word mentioned until at least December. However, if you’re self-employed, now’s the time to start thinking about the festive period, particularly with regards to submitting your Self-Assessment tax return (SATR). Here’s all you need to know:

 

What is a SATR?

Self Assessment tax return or SATR is the system by which HM Revenue and Customs (HMRC) collect tax on your income.
Whereas tax is typically deducted automatically from wages, savings and pensions, if you’re self-employed, it’s your responsibility to declare taxable income and to notify HMRC that you need a tax return form. Fail to complete a return when necessary and you’ll receive a penalty.

 

Who needs to complete one?

If you can say yes to one or more of the below criteria for the last tax year (6 April 2017 to 5 April 2018), it’s highly likely you’ll need to complete a SATR:

You were self-employed and your income was over £1,000
You received over £2,500 from renting out property
You’re a partner in a partnership. The Partnership will have to file a return, too
You’re a company director
Your annual income was £100,000 or more
Your annual income was £50,000 or more, and you or your partner was in receipt of child benefit
You received over £2,500 in other untaxed income, such as commission or tips
You needed to claim expenses or reliefs, or you’re a trustee
You had Capital Gains Tax to pay, for instance if you sold shares or a second home
You had £10,000 or more in dividends or from other investments
You had income from abroad you needed to pay tax on

If HMRC send you a return to complete but you find none of the above apply to you, you should get in contact with HMRC as it may be an error.

 

What are the deadlines this year?

You have to submit returns for tax years, not calendar years. Meaning, this return will be to declare tax on income and gains from 6 April 2017 to 5 April 2018. The deadlines for submitting the returns are as follows.

5 October 2018 for registering for Self Assessment if you have never submitted a return before
31 October 2018 for submitting a paper tax return
31 January 2019 for submitting an online tax return (you need to submit your online return by 30 December 2018 if you want HMRC to automatically collect tax owed from your wages and pensions, however you must be eligible)
31 January 2019 for paying all of the tax you owe

 

What are the penalties?

If you need to file a return but it’s up to three months late, you’ll receive a penalty of £100, with this sum increasing the longer you leave it. If a partnership tax return is late, all partners will have to pay a penalty.

 

What if you make a mistake?

If you realise that you’ve made a mistake on your tax return, don’t fret – you’re able to make amendments after you’ve filed it. But the deadlines are as follows:

31 January 2019 for the 2016-17 tax year
31 January 2020 for the 2017-18 tax year

 

Partnering with Intouch

If you’re one of our clients, your dedicated Personal Accountant will have already been in touch to guide you through the process and make sure you know exactly what needs to be submitted.

We offer complimentary completion of a SATR for one employee as part of our comprehensive monthly services for contractors. If you want to find out about the many other features of this plan, or about the benefits of partnering with Intouch, call 01202 375758 today.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

How to switch over to Intouch – Infographic

Are you thinking of switching over to Intouch from your current accountant? Then take a look at our infographic to see how easy it is…

 

Switching to Intouch

The importance of personal service

We’ve all been there: we call our bank, a service provider or company with a minor query, only to be passed through multiple departments and asked the same questions over and over again. We feel like we’re just a name in a long line of callers – and we can’t help but feel fed up and frustrated when we put the phone down.

In these situations, there’s one important thing missing: the personal touch. And when you’re paying for a service – for instance, from a Contractor Accountant – personal service is something you truly deserve.

Personal service is important because:

• It shows respect. In our opinion, adding a personal touch is part and parcel of offering a quality customer experience. After all, when you entrust in a company to provide a service (and you’re paying for the privilege), you don’t expect to be treated like ‘just another customer.’ You want to feel special – and you deserve to.

• It enhances relationships. You’re far more likely to be satisfied with a company that treats you as an individual – a company that understands your unique circumstances, and offers quality solutions based on your needs.

• It reduces time-wasting. Time’s precious when you’re a freelancer or contractor running your own company. By pairing with an accountant who’s taken the time to understand your unique needs, you can expect to receive expert, accurate advice and support almost straight away, whenever you need it. Less time wasted means a more efficient partnership.

 

Contractor accounts: what to look out for

If you’re just about to set up a Limited Company, or have decided it’s time to switch accountants, ensuring you’ll receive a personal service throughout your professional relationship should be one of your top priorities.

When searching around, an important thing to look out for is if you’ll be dealing with call centres and Account Managers, or if you’ll be paired up with your own, Personal Accountant. In all cases, the latter option is best.

A qualified, expert Personal Accountant will take time to familiarise themselves with your accounts and learn what you want to achieve financially from your contractor pay. They’ll be on hand to offer tailored support, based on your goals, whenever you need it.

 

Intouch: personal, professional

The team at Intouch prides itself on our personal approach to contractor accounting. In fact, it’s the one thing we think really differentiates us from all the other accounting companies – it’s our USP, so to speak.

Choose Intouch and you’ll be partnered with a dedicated Personal Accountant the moment you become one of our valued customers. Their first job will be to get to know you on a personal and professional level, which, in our eyes, is a crucial step in providing a high-quality service.

As soon as your Personal Accountant feels comfortable with the nature of your business and what you want to achieve, they’ll explain how they will help you to reach your goals.

A monthly fee entitles you to unlimited advice from a dedicated Personal Accountant, 24/7 access to our portal for day-to-day accounting tasks, and assistance with duties such as quarterly VAT returns, year-end accounts, payroll returns and self-assessment tax return.

Ultimately, your Personal Accountant is responsible for supporting you with the financial duties owning your own company brings. This means your time will be freed to focus on attracting new customers and growing your flourishing business.

We’ve gained a reputation for our unrivalled service and industry knowledge, and as testament to this have been voted the UK’s Best Small/Medium-sized Contractor Accountant by Contractor UK readers. Start your journey with us today by calling 01202 375 293.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

IR35 in the private sector – HMRC announces consultation

In last Autumn’s Budget, the government announced that it would consult on how to tackle non-compliance with IR35 rules in the private sector. On Friday, HMRC issued this eagerly-awaited consultation which they say “looks at improving the rules around ‘off-payroll’ working so contractors who work through their own company pay the right tax.”

At Intouch, we would suggest that HMRC learn from the negative feedback following the public sector reform and at the same time, remember that private sector and public sector hirers are different entities with different motivations and potential responses. They engage with their clients in different ways and often at different levels and as such we’d encourage HMRC not to view them as the same with respect to off-payroll rules and deemed employment. Input should be taken from across the industry with a view to tailoring a bespoke private sector solution that improves compliance whilst mitigating any potential administrative burdens.

The consultation timescales mean that any changes could be introduced as early as April 2019, although we’d urge HMRC to take the time to consider timings very carefully to avoid any negative impact to the UK economy as we move forward with Brexit.

Intouch will be responding to the consultation and we encourage all other interested parties to contribute; that means contractors as well as end-hirers who want to continue to have access to and support self-employed contractors. You can see the consultation and how to send your response here – you have until 10th August!

If you want to have your say but need to brush-up on your IR35 knowledge, check out our resources below:

Guide – Embracing IR35
Infographic – IR35; Don’t panic!
IR35 FAQs

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

What insurance do you need as a contractor?

When starting up as a contractor, taking out appropriate insurance should be one of the top things on your to-do list.

 

Why do you need it?

Rather than being just another cost to factor in, insurance can help you secure that first contract, as most clients and agencies will insist that you’re sufficiently insured before investing in your services.

There are other benefits in seeking protection from insurance, beyond the obvious peace of mind that it brings: it provides you with cover should you be accused of causing property or reputational damage. Insurance also acts as a key IR35 status indicator, signifying to HMRC that you’re genuinely self-employed and not a ‘disguised employee’.

To put it plainly, having appropriate protection in place makes business sense and gives you credibility. The question is, what business insurance do you need?

The answer will vary depending on your area of business. But there are three types of insurance that nearly all contractors will require:

 

1. Professional Indemnity

It goes without saying that you want to do a great job for your clients, for reasons of professional pride and repeat business, but sometimes errors or omissions can occur which can cause a relationship to go sour.

Being accused of professional negligence is just about every contractor’s worst nightmare, but when you have Professional Indemnity insurance, you don’t live in fear of an accusation by a client that your work has cost them money. It provides cover for legal defence costs and if damages are awarded against you.

 

2. Public Liability

If your line of work dictates that you have to work in someone else’s premises or out in the field, then you’ll need Public Liability insurance. It provides protection in the event of an accident while supplying services; for example, injuring a passer-by or breaking a valuable piece of equipment.

The protection will cover the cost of any potential lawsuits, replacements, legal fees, medical bills and compensation resulting from an accident. Failure to take out Public Liability can lead to you having to pay compensation out of your own pocket.

 

3. Employers’ Liability

If your company employs anyone other than yourself, you’ll need Employers’ Liability insurance. In fact, if you employ more than one employee, it’s a legal requirement to take out cover. Employers’ Liability insurance protects you against the cost of compensation as a result of employee injury or illness.

While a claim against you might be unlikely, especially if you have a close relationship with your employee(s), many agencies and clients will only consider your company if you’re sufficiently covered.

 

Where can you buy the right insurance?

The amount of cover required depends on your individual circumstances – the degree of risk can vary considerably depending on what it is that you offer and how it’s offered. But, it can be difficult to ascertain just how much cover you might need. Some insurers make contractors’ lives easier by offering packages that come with comprehensive cover as standard.

Specialist contractor insurance provider Kingsbridge combine Public Indemnity, Public Liability and Employers’ Liability cover into one single policy. This policy also comes with Occupational Personal Accident cover as standard, plus Directors’ and Officers’ Liability insurance.

 

To find out more about Kingbridge, click here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

What you need to know about IR35

Familiarising yourself with numerous legislation is just one of the many tasks involved in setting up your own business. But for contractors, specifically, there’s a crucial piece of legislation to get to grips with: IR35.

 

What is IR35?

IR35 is a type of tax legislation put in place to prevent contractors from limiting their tax liabilities by supplying services through a Limited Company, despite carrying out the same work as the company’s employees. In short, it’s designed to stop false self-employment.

 

Does it affect all contractors?

HMRC defines ‘disguised employees’ as contractors who are treated and act like any other member of staff working for a company. IR35 law aims to stop disguised employees trading under an intermediary, which would entitle them to greater tax benefits.

It may seem simple on paper, but in actual fact, many contractors have found it difficult determining whether or not the legislation applies to them. Trading as a Limited Company and working ‘outside’ of IR35 can result in higher take-home pay than an Umbrella agreement, but you need to be certain about your position or you could face financial penalties.

Another thing to bear in mind is that the legislation applies to each individual contract. This means that you might be outside of IR35 for one contract, but within its scope for another. And that’s why it’s important to conduct thorough contract review processes, in order to clarify if any part of your work falls inside the legislation.

 

What penalties could I face?

Contractors found to have been ‘careless’ can be fined 30% of unpaid tax. This climbs to 70% of unpaid tax if the contractor was aware they were inside of the legislation but deliberately did not make the payment; and 100% of unpaid tax if they also tried to conceal their actions.

 

Whose responsibility is to determine IR35 status?

Big changes were introduced from April 2017, which saw the responsibility of determining IR35 status move from the contractor to the client. But this is only where the contract is with a public sector body. The government are currently also debating rolling it out to cover the Private Sector, although this is likely to take some time, if it happens at all.

Some evidence suggests that this has had a negative impact on the industry, causing firms to insist their contractors trade under an Umbrella agreement to relieve the burden of payroll and other administrative duties.

 

Pairing up with a professional

If you’re considering setting up as a contractor, the experts at Intouch Accounting can help you to navigate the minefield that is IR35. We’ll make sure you understand your rights and risks under IR35 and other laws, and will review your contracts for compliance. To find out more about our service, get in touch today.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.