Increased relief for R & D expenses

Duncan Barr — Fri, 04 May 2012 08:16:45 +0000

From 1 April 2012 the tax deduction for research and development (R & D) expenses available to SMEs was increased from 100% to 125%. So, for example, a company that spends £8,000 on R & D expenses will be entitled to a tax deduction of £18,000. Assuming Corporation Tax on profits at the small profits rate of 20%, this will result in a tax saving of £3,600.

It’s now also easier to make a claim for R & D tax relief because certain restrictions have been removed in respect of expenses incurred on or after 1 April:

There is no longer a minimum spend on R & D projects. Before April 2012 a company had to spend at least £10,000 on qualifying R & D expenses, excluding capital equipment, in any year to make the claim.

There is no restriction on the amount that can be claimed as payable tax credits. For period ending before 1 April 2012 the payable tax credits were capped by the amount of the company’s PAYE and NI contribution liabilities.

If you would like any advice on salary levels or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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How much should I now pay myself?

Duncan Barr — Fri, 20 Apr 2012 15:43:47 +0000

As a director and shareholder of your own company you can decide how much salary to pay yourself each month, in order to use your personal allowance in the most tax efficient way. As a director of your personal company you do not have to pay yourself the national minimum wage unless you have an employment contract with your company.

From 6 April 2012 the tax free personal allowance is £675 per month (£8,105 per year), so you could take a salary at that level and pay no income tax. However, the monthly thresholds for paying class 1 national insurance (NI) are: £634 for employees and £624 for employers. If your salary is £675 gross per month, your company needs to deduct NI of £4.92 and pay employer’s NI of £7.04 on top.

If you take a lower salary of just over the NI lower earnings threshold of £464 per month you will get the NI credit, so your wages count towards your state pension entitlement, but you don’t pay any tax or NI and neither does the company. However, at that annual salary level (£5,568) you will be ‘wasting’ £2,537 of your tax free personal allowance. At £624 per month there will be no NI to pay and you only have £617 of unused personal allowance, so this is likely to be more beneficial.

As a director’s salary is an allowable expense for Corporation Tax purposes it is always beneficial to pay yourself a salary but talk to us first about the best salary level for you. The correct procedures also need to be in place when paying a salary and we will also need to take into account your other sources of income.

If you would like any advice on salary levels or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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Smartphones

Duncan Barr — Tue, 10 Apr 2012 07:45:40 +0000

HMRC has recently reviewed its guidance in respect of the tax treatment relating to the provision to employees of smartphones (including BlackBerrys). As a brief overview HMRC now accepts that smartphones satisfy the conditions to qualify as a mobile phone provided they are not solely PDAs, tablet or laptop computers. This updated guidance can be applied from January 2012 and employers can claim repayment of Class 1A NIC and employees income tax back to 2007/08, where this was accounted for.

For further details please refer to customs Brief 02/12 found at:

http://www.hmrc.gov.uk/briefs/income-tax/brief0212.htm

If you would like any advice on Tax or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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P11D Reporting Dispensations 2011/12 Tax Year

Duncan Barr — Wed, 04 Apr 2012 08:29:56 +0000

The reimbursement of business expenses to your employees should be reported on forms P11D unless covered by a P11D reporting dispensation. The final date that HMRC will accept applications for a 2011/12 P11D reporting dispensation is 5 April 2012. No retrospective dispensations will be accepted by HMRC in relation to the 2011/12 tax year following this date.

If you would like any advice on Tax or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

Minimising Family Tax

Duncan Barr — Mon, 26 Mar 2012 07:45:33 +0000

This is a good time to look forward to 2012/13 and assess who will be earning what in your family. The level of personal allowances (tax free income) have increased significantly over the last two years, and are increasing again in 2012/13 to £8,105 per person.

This allowance cannot be transferred between family members, so if someone in your family is earning less than this, their personal allowance is going to waste.

Strategies you may consider to avoid wastage of the personal allowance include:

1. Employing your spouse or children in your business, perhaps on a part-time basis.

2. Transferring an income-producing asset, such as a let property or savings account into the name of the lower earning spouse.

3. Taking on a family member as a partner in your business, so they can share some of the profits.

4. Ensuring the higher earner makes all the Gift Aid donations to charities from the family.

These changes should be made as soon as possible to gain the maximum advantage in 2012/13. The strategies need to be implemented correctly so please contact us for advice before proceeding.

One further reason to plan family income is that child benefit is being phased out from April 2013 if one person in a household is earning over £50,000. The benefit (currently worth at least £1,055 per year) will be reduced by 1% for every £100 earned over £50,000, meaning no benefit for those earning over £60,000.

If you would like any advice on Tax or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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2012 Budget Summary

Duncan Barr — Thu, 22 Mar 2012 09:58:29 +0000

The Chancellor promised a Budget which “unashamedly backs business”. We summarise the main tax changes below:

1. The main rate of corporation tax will be cut from 26% to 24% from April 2012 and will be reduced to 22% by April 2014.

2. No change to the small company corporation tax rate of 20% or the £300,000 profits threshold.

3. The government will consult on simplifying the tax system for small firms with a turnover of up to £77,000, by introducing a voluntary cash basis for unincorporated businesses, simplified business expenses system for business use of cars, motorcycles and home and the possibility of disincorporation relief.

4. Personal tax changes from April 2013:

Top rate of tax will be reduced from 50p to 45p.

Personal allowance raised to £9,205 (£8,105 from April 2012).

Age-related allowances for pensioners to be phased out.

Current unlimited reliefs will be capped at 25% of income or £50,000, whichever is the greater.

5. Child Benefit to be phased out by 1% for every £100 earned above £50,000 by someone in a household, meaning no benefit for those earning over £60,000.

6. From midnight Stamp Duty will rise to 7% on properties over £2m and 15% on properties held in companies.

7. A General Anti Avoidance Rule (GAAR) to be introduced in twelve months time.

8. Company cars:

£3,000 van benefit frozen in 2012/13.

From April 2012 the car fuel benefit charge multiplier increases from £18,800 to £20,200.

From April 2016 the 3% benefit diesel supplement will be scrapped.

9. No changes to Capital Gains Tax or IHT

10. A package of measures is promised to “tighten up on avoidance through the use of personal service companies and to make the existing IR35 legislation easier to understand”.

If you would like any advice on Tax or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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Did you miss the Self Assessment filing deadline?

Duncan Barr — Tue, 13 Mar 2012 08:45:57 +0000

Around 850,000 people apparently missed the 31 January 2012 Self-Assessment filing deadline. If you are one of them you’ll have received a £100 penalty even if you don’t owe the taxman any money. You have 30 days to appeal if you think you have an acceptable excuse.

In previous years the next penalty wouldn’t be until 31 July when a further £100 penalty would be levied. The regime is much more penal now.

If you are late by three months (i.e. from 30 April) there is a penalty of £10 for each day after that. This continues for the next 90 days, so by the end of July you’ll owe another £900 in fines. And if you still haven’t sent in your Return by 31 July you’ll have to pay another £300 or 5% of any tax you owe for 2010/11, whichever is the greater.

If you are holding off submitting your Tax Return because you don’t have all the information, you should not delay further. The Self Assessment system allows you to include estimated figures and confirm or amend them later. You just need to note on the form which figures are affected. So act now, or pay the Penalty!

If you would like any advice on Self Assessment or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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Looking ahead – Capital Allowances

Duncan Barr — Thu, 08 Mar 2012 14:16:28 +0000

From April 2012 there will be a reduction in the amount of expenditure on plant and machinery which qualifies for 100% year one write-off (via AIA), from £100,000 to just £25,000.

If you are about to invest in new capital equipment do not delay!

If you would like any advice on capital allowances or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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Is Your Payroll Information ‘Clean’?

Duncan Barr — Fri, 02 Mar 2012 08:45:11 +0000

The Taxman is asking all employers to spring-clean their payroll data to prepare for RTI. What does RTI stand for? It stands for Real Time Information, and within the next 18 months it will become as familiar to you as PAYE.

RTI is a new way of submitting payroll data to the Tax Office. Instead of sending the PAYE information in annually after the end of the tax year, all employers will have to submit the payroll data online on every occasion the payroll is run. This will allow the Taxman to understand who is being paid what amounts, and what PAYE is due, on a real-time basis. The details of employees’ pay will be passed to the Department for Work & Pensions, to allow the amount of Universal Credits (which are replacing Tax Credits from October 2013) paid to workers to be adjusted on a monthly basis.

RTI will be compulsory for all employers and pension providers by October 2013.

Before payroll data can be accepted under the RTI system it must be ‘clean’. That means having an accurate date of birth, full official name (not just initials or nick-name) and correct National Insurance number, for each and every employee. If the data for one of your employees does not agree to that on the Tax Office computer, the submission of the payroll data under RTI may fail, and you may get fined.

It will take some time to check the details of every employee on a large payroll, so it would be best to start this task as soon as possible.

If you would like any advice on payroll or any other matters please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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Buying a franchise – limited company or sole trader?

Duncan Barr — Fri, 24 Feb 2012 08:45:51 +0000

When starting a business one of the most important decisions to get right is whether to trade as a limited company or as an unincorporated body (sole-trader or partnership). There are many factors consider, including differences in taxation.

When you are looking to buy a franchise there is a particularly important aspect to consider, namely the tax-deductibility of the initial franchise fee. These fees can be very significant and typically include a charge for intangible assets such as goodwill and know-how. Here lies the different tax treatment: unincorporated businesses cannot claim a deduction from income for this cost – instead they can only set off the costs against any eventual sale proceeds when they sell the business some years down the line. Worse still, sometimes franchise agreements do not allow the business owner to sell or transfer the intangible assets, so you receive no tax relief at all.

Conversely, since April 2002, companies have been allowed to claim a deduction against trade income for intangible assets, normally spread over, say, five years. So it’s much preferable in this particular aspect to run a business through a limited company.

If you would like any advice please click here to contact us or call DBA Chartered Accountants on 0113 244 9811.

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