OUT! Brexit: What will it mean for UK taxes?

Umpire - OutIn the historic referendum of 23 June 2016, the UK public voted to leave the European Union (EU). The following period has been filled with political and financial uncertainty, as the country contemplates its future outside the EU says Robert Woolley of HPH Accountants LLP.

Travelling down through France on Eurostar and the TGV on Friday 24 June 2016, en route to our holiday, my wife and I were greeted with Gallic shrugs of pity and incomprehension – “What have you done?” Things were certainly uncertain!

However, one thing seems to be certain: in the words of our new Prime Minister, Theresa May, “Brexit means Brexit”.

The precise impact of the decision on UK taxes will depend on the new terms negotiated with the EU. The most likely scenarios for a post-Brexit UK, however, include:

  • The UK joining the European Free Trade Association and the European Economic Area, and so retaining access to the single market, in the same way as Norway, Iceland and Liechtenstein;
  • The UK negotiating a standalone free trade agreement with the EU, as Switzerland does; or
  • The UK negotiating an ongoing customs union with the EU, as Turkey does.

The good news is that much of the UK’s tax legislation is independent from EU influence and will therefore be largely unaffected by Brexit. This includes income tax, capital gains tax and inheritance tax.  However, there are a few notable exceptions:

VAT

UK VAT has been harmonised with the EU since 1977. Following Brexit, while the UK may no longer be required to give effect to any EU VAT Directives or regulations, it seems likely – in the short term at least – that that the country will maintain its current VAT system.

The most tangible consequence of Brexit is that VAT may need to be charged when goods enter the EU from the UK and when EU goods move in the opposite direction. The VAT will often be recoverable, but this could still cause unwelcome cashflow issues for many businesses.

Customs duties

To the extent that the UK ceases to be part of the customs union, then customs procedures would need to be reintroduced for exports between the UK and the EU.

We are unlikely, however, to see the imposition of any significant duties, as this would disadvantage the UK’s exports. Around 50% of UK exports are to the EU.

Corporation tax

Although corporation tax is determined only by the UK government, we have still been required to amend our tax legislation on several occasions, to comply with EU Law. After Brexit, UK tax legislation should no longer be open to challenge on the basis that it is contrary to EU law.

On a wider scale, Brexit may also accelerate the harmonisation of corporate taxes across the rest of the EU – a move which the UK has historically opposed.

In summary, there remains significant uncertainty around how great an impact Brexit will have on UK taxes. However it is likely that any changes will be focused on the technical rules, rather than increasing (or decreasing) the overall burden on taxpayers.

If you have any concerns how Brexit will affect your business contact us here at HPH, we will always be on hand to advise on how any changes might affect our clients.

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The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice. We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

In Out, In Out, Shake It All About

EU FlagStepping aside from the “Hokey Cokey” of the referendum debates, Robert Woolley of HPH, Accountants LLP looks at some recent findings and views from the business community on the matter.

As 23 June 2016 looms large on the horizon, nothing is surely more topical than the EU referendum at the moment.

As our politicians continue to hotly debate the topic (or rather sling mud at each other), only one thing seems to be certain at this moment in time… it’s going to be a close-run thing.

Recent data from the British Chambers of Commerce, released from their final survey before the poll, showed that the lead held by the ‘Remain’ camp has narrowed.

Interestingly, when looking at the results a little closer, we can see that a 54.1% majority of senior business people surveyed intend to vote to remain.

Those trading with other EU markets expressed the strongest support for that particular campaign. Another intriguing finding was that business people representing micro-businesses were significantly more likely to vote ‘Leave’ than those from large entities.

If the last General Election taught us one thing though, it was that such polls and surveys should very much be taken with a pinch of salt. As such, there is still all to play for.

Although it isn’t my place to pass on my opinion to you, I would say that history dictates that whatever the outcome, neither solution will prove totally positive, or totally negative.

Some will benefit while others will find themselves suffering as a result.  It could even be that things get worse before they get better. The truth is that nobody really knows with any certainty!

Whatever the outcome on the 23 June, life will go on and business will continue.  The likelihood is that once the dust has settled and Westminster has tried to glue itself back together, the attention will quickly turn back to economic growth, with so much time and attention having recently been given to the build-up to the referendum.

Here at HPH, we will always be on hand to advise on how any changes might affect our clients.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice. We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

From Xero to Hero!

Xero to HeroMore and more accountancy professionals are encouraging their clients to use the cloud-based platform Xero. Robert Woolley of HPH Accountants LLP outlines exactly what it is the technology can offer.

Xero’s cloud-based accounting software not only allows for multi-user access from anywhere, but it also creates the opportunity for banks to provide direct daily feeds.

Alongside the intuitive reconciliation process, businesses really do have a tool which can now produce up-to-date financial data at the touch of a button. No wonder that Xero is increasingly recommended by so many accountants.

An added advantage to the platform is that it’s led to much greater co-operation between business owners, their employees and professional advisers. Because data is both live and visible, your accountant is now “The Real Time Accountant” adding value throughout the year: monitoring how your business is performing, spotting book-keeping errors and providing support when you need it.

What about when you’re on the move? The Xero app allows you to reconcile your banking, create invoices and submit expense claims from a smartphone or tablet, which means that you’re always in touch with your financial information wherever you go.

How does it work in practice?

You can send a quote to a customer and the software allows them to accept, reject or amend it online. It’s then easy to convert this data into a sales invoice which can be paid at the touch of a button. The same is true when it comes to raising purchase orders

What about cash collection? Well, the Xero dashboard allows you to see at a glance which customers’ invoices are outstanding. And there’s no need to hang on to paper copies of purchase invoices, as Xero will store an electronic record for you.

If you choose to give your accountant access, they’ll be able to review your VAT records alongside your invoices and check everything before filing the return via Xero to HMRC.

To understand the full potential of Xero, talk to us at HPH Accountants LLP; contact our Xero Champions Richard Clarkson (richard.clarkson@hphonline.co.uk) and Emily Broadhead (emily.broadhead@hphonline.co.uk). They may even be able to suggest add-ons which integrate with the platform. WorkflowMax, for example, allows employees to input and allocate material costs, as well as their hours worked on specific jobs. A great way of managing business performance.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice. We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

Rolling, Rolling, Payrolling

Wagon TrainSarah Meek, Payroll Administrator at HPH Accountants LLP, looks at a new kind of approach to benefits in kind.

“From the tax year 2016-2017, big changes are planned in the reporting of tax due on benefits. The new system promises to be more efficient, as it will operate through payroll.

The reporting of benefits in kind has traditionally been done via the Revenue’s P11D form. Thanks to changes in the Finance Act 2015, however, it’s now going to become possible to process most of these benefits through your payroll system instead.

From 6 April 2016, your employees will pay tax on the benefit at the time they receive it, which removes any risk of underpayments occurring. At the moment, the system is pretty inefficient, as a P11D is only filed after the end of a tax year, which can lead to a significant time lag before payments are properly coded and reconciled.

To take advantage of the new service, you will need to register the benefits you intend to operate via the payroll before a deadline of 5 April 2016. There, are however, some things you need to bear in mind.

First of all, there are three categories of benefits that you will not be able to put through the payroll, which are:

  • Vouchers and credit cards
  • Living accommodation
  • Interest-free and low-interest (beneficial) loans.

You should also note that only PAYE tax will be collected through the payroll, not National Insurance. The Class 1A National Insurance will still be due and must be paid by 19 July by post or 22 July electronically. As a result, a P11D(b) will still have to be submitted to account for the Class 1A payable.

HPH has already aligned their payroll software to ensure that the right amount of tax is collected on benefits in kind, so it makes sense to have a chat with us before registering your intention online at https://www.tax.service.gov.uk/payrollbik/payrolled-benefits-expenses.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice. We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

Laundry Look Out

Money Laundering Series

Money laundering: your role in stopping the criminals.

It’s not just accountancy firms and tax officials who have obligations in relation to money laundering, writes Charles Walker, Money Laundering Reporting Officer at HPH Accountants LLP.  HMRC expects many others to play a role too.

As you might guess, your accountant is expected to be on the look-out for potential money-laundering and is obliged to report suspicious activity to the relevant authorities. In fact, we’re constantly being reminded of this responsibility by our professional body.  It’s all part and parcel of ensuring that businesses and organisations observe the highest standards and conduct their affairs in a proper legal framework.

What’s less well known is that a number of other businesses are technically required to be registered with HMRC for the purposes of monitoring money-laundering too. These range from estate agents and car dealers through to jewellers and builders.  In fact, any company which may take a cash payment equivalent to €15,000 or more.

If you don’t register at the correct time and have to be prompted by HMRC, you will be liable for a fine of £500.

There are essentially five categories of company that need to register:

Money Service Businesses

This is where you act as a bureau de change, transmit money or cash cheques. If you’re not already supervised by the Financial Conduct Authority for the purposes of the Money Laundering Regulations, you must register with HMRC.

High Value Dealers

You will be categorised as a High Value Dealer if you take a single cash payment of €15,000 or more or several cash payments adding up to this amount.  Car and boat dealers, antique dealers and auctioneers may often fall into this category, along with bathroom and kitchen suppliers and builders.

Trusts or Company Service Providers

This refers to companies and sole practitioners who form companies, provide registered offices and business addresses or act in a number of similar capacities.

Accountancy Service Providers

Here, we’re not just talking about auditors, accountants and tax advisers, but also people who provide professional bookkeeping services and help prepare accounts.

Estate Agency Businesses

Are you acting on the instructions of a customer who wants to buy or sell commercial or residential property?  Or are you introducing to a customer someone who wishes to buy or sell property? If so, you will need to be registered.

You can find more information at https://www.gov.uk/guidance/money-laundering-regulations-register-with-hmrc, but if you’re in any doubt of your responsibilities, it’s important to talk it over with us at HPH.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice.  We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

Dividends RIP?

Dividend UpdateRobert Woolley of HPH Accountants LLP looks at the forthcoming changes affecting dividend income from 6 April 2016 and considers whether or not dividends as part of a remuneration package are “dead”?

Particularly for shareholder directors of private limited companies, at present there are considerable savings in National Insurance Contributions (NIC) to be made by adopting the “classic” remuneration strategy where a minimal amount is paid as salary and any balance of the remuneration package is paid as dividends.

From April 2016, the NIC status of dividends is not changing and therefore this strategy is still valid.

Unfortunately, the income tax position of dividend income is changing and this may have a direct impact on the overall savings in NIC and income tax that can be achieved.

What’s changing?

From 6 April 2016, the way dividends are being taxed will change. The 10% tax credit is being abolished and each individual will have available a flat rate dividend allowance of £5,000. Any dividends received by an individual in excess of £5,000 will be taxed as follows:

  • 7.5% if your dividend income is within the standard rate (20%) band
  • 32.5% if your dividend income is within the higher rate (40%) band, and
  • 38.1% if your dividend income is within the additional rate (45%) band

Without the tax credit, a dividend income of £30,000 received in 2016-17 would create the following, additional income tax liabilities, compared with the position in 2015-16.

Comparison of tax payable on dividend income of £30,000:

Income tax due if dividend received  is £30,000 2015-16 2016-17
Dividend is within the standard rate band Nil £1,875
Dividend is within the higher rate band £7,500 £8,125
Dividend is within the additional rate band £9,167 £9,525

Based on these figures:

  • if your dividend income is within the standard rate band you would have extra tax to pay for 2016-17 of £1,875;
  • if your dividend income is within the higher rate band you would have extra tax to pay for 2016-17 of £625, and
  • if your dividend income is within the additional rate band you would have extra tax to pay for 2016-17 of £358.

As you can see, this new tax on dividends will impact on standard rate tax payers the most. In all cases any tax liabilities for 2016-17 will be collected on 31 January 2018. At the same time, HMRC will also add 50% of the tax liability to your first self assessment payment on account for 2017-18, also due 31 January 2018 with a further 50% due at the end of July 2018.

Call us at HPH for professional advice to see how these changes will affect your personal tax position for 2016-17. Although you will not need to pay addition tax due until 31 January 2018, there may be planning options that could be employed to lessen the blow.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice.  We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.

 

Mum’s The Word!

Mum & child

How mums can give birth to new businesses

Robert Woolley of HPH Accountants LLP has worked alongside a number of ‘mumpreneurs’ and is convinced that it’s definitely possible to achieve business success while raising a family.

It’s easy to think that being a mother and owning a start-up business are incompatible. Anecdotal evidence, however, suggests that the phenomenon is becoming more and more common.

Robert’s advice is that if you have a good idea and the confidence to pursue it, you should follow your instinct. Don’t automatically assume that having a young family is going to stop you.

Of course, there’s a need for discipline if you’re going to balance work with family life. If you’re not organised and efficient in the way you work, then you won’t be able to achieve a sense of equilibrium. But it’s usually a matter of working smarter rather than working longer.

Are you generally flexible and adaptable? If so, you’ll be able to deal with the unexpected, which is an inevitable part of running a successful business. Looking after kids may demand many of the same skills, in fact!

It’s important that you set the terms. You need to work in a way that suits you and shouldn’t think that what someone else has done is necessarily a good model. This is a personal balancing act.

Finding a good accountant and taking their advice is a critical first step. They we will advise you on how to get started, the different structures you might consider and the way in which you’re going to remunerate yourself. They’ll also have plenty of advice on potential pitfalls.

At a practical level, your professional adviser can take charge of admin such as bookkeeping, payroll, VAT and tax. All responsibilities which can often become a troublesome burden for a fledgling entrepreneur.

So don’t let being a mum stifle your business ambitions or creativity. Contact us at HPH where there’s plenty of help so you can make it work.

Back to main website: http://www.hphonline.co.uk/

The information contained within the above blog article is for general information purposes and may be time critical; it does not constitute professional advice. We accept no responsibility for any loss which may arise from reliance on the information contained in the blog article. Always seek professional advice before acting.