Posts Tagged ‘Bromsgrove accountants’

Tax and the gig economy

Thursday, June 14th, 2018

Technological advancements have meant we have more options when it comes to where and when we work and our attitudes towards our working lives has contributed to a growth in the  ‘gig economy’. Gone are the days of a ‘job for life’ and the expectation that we will retire in the same job or even industry that we started in.

Those in the gig economy can hold down multiple self-employment roles on a regular, organised basis and with a view to earning a living. This shift in the way we work has been encouraged by the government in a bid to stimulate ‘micro entrepreneurship’ and has successfully encouraged people to start new ventures. One area which needs addressing however is that of taxation – how does the gig economy tax itself?

Who is part of the gig economy?

The list isn’t exhaustive and includes:

  • Online sellers such as ebay and Etsy
  • Homeowners renting out through Airbnb
  • Casual work through sites such as Uber, Deliveroo, Task Rabbit
  • Bloggers and digital influencers on platforms such as Instagram, Pinterest etc
  • Digital nomads, freelancers and potentially non-UK resident workers

What many in the gig economy don’t realise is that their activities fall under the realms of self-employment and that by law, they are required to notify HMRC of their income sources.

Even one-off activities or very casual work can be taxable, with HMRC requiring a self-assessment tax return disclosing all relevant income and expenses.

What action should be taken?

If you have income as described above, you are likely to need to notify HMRC. This should be done within 6 months following the end of the tax year in which the income arose (i.e. by 5th October). If HMRC requests you complete a tax return, you should file it by 31 January (if done online) following the tax year end in which the income arose. You may need to pay taxes and National Insurance depending on your calculations. HMRC can impose penalties on those who fail to notify in time, who fail to submit a return by the deadline and has the power to impose tax-geared penalties for those who pay insufficient tax.

Tax reliefs available and ways to earn income tax-free

There are upsides to working in the gig economy and whilst workers have an obligation to manage their own tax affairs (employees have their tax deducted at source by employers under PAYE), here are some tax reliefs to consider:

  • Rent a room relief – earn up to £7,500 tax-free by renting out a room in your home
  • Sell your unwanted stuff on sites such as ebay; some gains might be offset by the capital gains tax exemption
  • Rent out your driveway or garage storage – earn up to £1,000 tax-free
  • Personal allowance – up to £11,850 of income can be earned tax-free in the current tax year; this can’t be carried forward so it’s a case of ‘use it or lose it’
  • Dividends – business owners can take advantage of the dividend allowance currently available

We’re here to help you understand your tax obligations. Please get in touch to find out how we can help you. [email protected] or call 01527 558539.

gig economy

The gig economy in action

 

New Partnership Tax Rules

Monday, February 24th, 2014

From 6 April 2014, the rules governing the taxation of partnerships will change significantly and could affect a large number of people working under such arrangements.

The two main areas of focus are:

Limited Liability Partnerships

From 6 April 2014, the automatic presumption of self-employment will be removed for partners of LLPs. The salaried member legislation is being amended so that those members who are effectively in the same position as employees will be taxed as employees. Partners will have to satisfy certain criteria to continue to be treated as self-employed partners for tax and national purposes.

All Partnerships

The second strand of the new legislation focuses on partnerships with corporate members and is targeted to prevent tax motivated allocation of partnership profits and losses. Legislation will include provisions to allow excess profits to be reallocated from a non-individual partner to an individual partner and also deny certain income tax loss reliefs and capital gains for a loss allocated to an individual partner.

We are currently reviewing the possible effect of these new rules on all of our partnership clients. If you would like further information, please contact Helen Sewell on 01527 558539 or email [email protected].

Statutory Residence Tests – the new rules

Monday, January 27th, 2014

Statutory Residence Tests – the new rules

From 6 April 2013 the rules determining if someone is resident in the UK for tax purposes have been put on a statutory basis known as the Statutory Residence Test (SRT).

The SRT is used to determine an individual’s status for income tax, capital gains tax and inheritance tax but not national insurance.

The SRT consists of a series of tests which include:

  • an automatic test to determine  non- residence; this looks at the position in the previous three years and the number of days present in the current year
  • an automatic test to determine residence; this looks at where homes are based and whether there is a UK presence of more than 183 days in the current tax year.

If individuals are not deemed to be automatically resident or automatically non- resident as a result of these initial tests, further testing comes into play as follows:

  • a test to determine sufficient UK ties which is split between ‘arrivers’ and ‘leavers’ and finally
  • a day counting test, again split between ‘arrivers’ and ‘leavers’.

Sufficient UK Ties

 If neither of the automatic tests determine the status, an individual’s UK residence status then depends on how many of the specified “UK ties” apply to them and how many days they spend in the UK in the tax year in question. The greater the number of UK ties that apply to the individual, the fewer the number of days they can spend in the UK without becoming UK resident.

The UK ties include:

–          having a UK resident family (i.e. a child under 18, spouse, civil partner or person with whom the individual is living as spouse or civil partner)

–          having substantive UK employment of more than 40 days in UK in a tax year

–          having accessible UK accommodation

–          being present in the UK  for more than 91 days in either of 2 previous tax years

–          country tie (applies to leavers only) – you spent more days in the UK than any other single country in the tax year.

Which UK ties are relevant depends on whether or not the individual was UK resident for any of the three tax years before the tax year in question.

When applying these rules, each tax year must be considered separately and the tests must be done in order. Once you meet an automatic test you do not need to consider any later tests.

To discuss residence issues in more detail, please contact Julia Whelan on 01527 558539 or email [email protected].

How to avoid a fake accountant

Monday, January 20th, 2014

Accountants are all the same, right?

Wrong.

Just about anyone who deals with numbers could call themselves an accountant. They don’t have to be trained or qualified in anything or be subject to monitoring from any recognised professional body.

Being ‘chartered’ means someone is professionally qualified and includes not only accountants but also surveyors and engineers. Chartered professionals have had to train to the highest standards there are and maintain a high degree of ethics and professional conduct. We’re also obliged to undertake regular technical training to ensure we can offer the best and most timely advice to our clients.

When you first come across an ‘accountant’, the Institute of Chartered Accountants in England and Wales (ICAEW) suggests asking:

  1. Are you a qualified chartered accountant?
  2. Do you offer the services and have the experience I need?
  3. Are you authorised to do audit work?

Some of the areas we can help businesses with include:

  • Planning your business, so accessing finance, preparing a business plan and advice on self-employment and limited company status
  • Starting your business – Tax advice for owner-managers and the employer aspects too, VAT, record keeping, forms and legal issues
  • Managing your business – we can advise on cash flow, budgeting, management accounts and employing staff
  • Expansion of the business – access to different types of funding, restructuring issues, exit planning

We also offer personal tax services from tax compliance and capital gains tax to estate planning and trusts.

Curo Chartered Accountants is also part of the ICAEW’s Business Advice Service. Chartered accountant members of this service offer a free hour’s advice to businesses and help guide them in their plans.  If you are interested in speaking with a qualified chartered accountant, please either get in touch direct on [email protected] or try the Business Advice Service on www.businessadviceservice.com

We look forward to hearing from you!

Curo Chartered Accountants

January 2014.

HMRC crackdowns hit SMEs the hardest

Monday, September 23rd, 2013

Compliance investigations undertaken by HMRC into the SME sector netted £565m in penalties and fines for the 2012/13 tax year. This haul represents an increase of 13% on the prevous year as HMRC continues its onslaught on the corporate sector, desperate to hit government-imposed tax recovery targets.

The SME sector is being seen as ‘easy pickings’ in respect of tax investigations as SMEs often lack the budget for tax advice and representation by tax specialists, unlike the larger corporates.

The government hopes to raise around £7bn a year through tax compliance investigations, which will focus on ensuring a company has fulfilled its tax obligations with HMRC. Tax compliance includes the submission of forms such as the corporate tax return and supporting calculations, preparation of claims and elections and dealing with HMRC enquiries.

If you’d like to discuss your company’s tax position and exposures, Curo’s head of tax, Julia Whelan can advise. Email Julia on [email protected] or call her on 01527 558539.

Curo Chartered Accountants

Sep 2013.

Salary sacrifice – are you missing out on tax breaks?

Monday, September 16th, 2013

Recent findings suggest that millions of taxpayers are missing out on tax savings as they’re unaware of their entitlement to ‘salary sacrifice schemes’.

What is it?

Salary sacrifice happens when an employee gives up the right to part of their salary or bonus due under their employment contract. A non-cash equivalent is taken instead and the act of doing so means that the employee’s contractual terms are changed.

Such schemes have been in place for a number of years, with take up higher in some sectors of the economy than others.

For a salary sacrifice scheme to be effective in HMRC’s eyes, the employer must be able to demonstrate that new contractual arrangements have been made, ultimately satisfying HMRC that:

  • The employee’s entitlement to cash has been reduced,
  • That a non-cash benefit has been provided by the employer and
  • That the employer is not simply meeting the employee’s own financial commitments

The reason for the popularity of salary sacrifice schemes is that the employee can opt to receive benefits which are tax and/or NIC exempt and there are associated savings too for the employer.

What can I receive under salary sacrifice?

One of the most popular salary sacrifice items has been childcare vouchers, where the employee elects to receive tax-free vouchers to go towards paying for qualifying childcare places. Tax savings can be around £900 per year as the vouchers are not subject to tax or NIC.  The employee’s gross salary is reduced by the vouchers received, leaving less salary subject to tax and NI.

However, the way taxpayers receive tax-free childcare is changing with a new system being brought in from 2015, providing up to £1,200 of childcare support per child.

Another popular salary sacrifice item is pensions, with taxpayers electing to receive less salary in exchange for tax-free deductions to a registered pension scheme. There is also the added bonus that generally the employer will make contributions to the pension, often matching the employee’s contribution.

Salary sacrifice is especially popular with taxpayers earning just above the £100,000 income threshold. Since April, individuals have had their personal allowance reduced by £1 for every £2 of income above £100,000. Many taxpayers have agreed to salary sacrifice schemes in which they pay enough into their pensions to get them below the £100,000 mark. This means not only are their pensions boosted, but that they continue to receive personal allowance in full.

Another group of taxpayers are those whose income sits above £50,000. Individuals with income in excess of this amount have had their Child Benefit cut since earlier this year. For those earning above £60,000, the Benefit is lost altogether. Using a salary sacrifice scheme could reduce relevant earnings to a level at which Child Benefit is preserved.

Many other items can be received as part of salary sacrifice schemes, for example:

  • Interest free loans to buy season tickets on trains
  • bikes under the ‘Cycle to Work’ scheme

What are the downsides to salary sacrifice?

Employees who enter into salary sacrifice schemes should be aware that this act will change their contractual terms of employment. It also means that their notional salary is reduced which will have consequences for salary-based bonuses and other benefits.

Those receiving maternity, paternity and sick pay may find that their payments are reduced or stopped if their earnings fall below the Lower Earnings Limit (LEL) of £102 per week. Salary sacrifice in these circumstances may carry the same advantages. Salary sacrifice cannot bring salaries below the minimum wage limit.

Our tax specialist in this area is Helen Sewell who can assist you with your queries. Call Helen on 01527 558539 or email Helen on [email protected]..

Curo Chartered Accountants grows by five new recruits

Monday, September 16th, 2013

Worcestershire-based Curo Chartered Accountants continues to grow at a rapid pace and has recently added five new recruits to its award-winning practice.

The team is now strengthened by further experienced technical staff for both the audit and taxation offerings.

Says Partner Anna Madden “We’ve been fortunate to recruit some excellent regional talent, including another ex ‘Big 4’ auditor and a returning staff member. Our offering to clients is stronger than it’s ever been and our recruitment drive is in response to a growing client portfolio”.

Curo’s expansion has continued throughout the recession and its latest growth corresponds with news that the economic recovery is gaining momentum across most sectors.

Continues Anna “What has helped us continue growing is sticking to a clear business plan, yet reacting quickly and positively to new opportunities in our market”..

NIC ‘Holiday Scheme’ comes to an end

Wednesday, September 4th, 2013

Back in the summer of 2010, the government launched the ‘National Insurance Holiday Scheme’, providing relief for employers from NI on earnings paid on or after 6 September 2010 and on or before 5 September 2013.

Employers could claim exemption from up to £5,000 of Class 1 employer’s NIC  for each of the first 10 employees hired in the first year of business. The scheme was open to employers setting up new businesses on or after 22 June 2010.

Despite much fanfare at the time, there has been little take up of the scheme and so its closure on 5 September 2013 is unlikely to affect many employers.

Those who set up businesses after 5 September 2012 and claimed NI relief under the NI ‘Holiday Scheme’ should note, however that they will not be entitled to a full year’s relief. HMRC is currently writing to employers and their agents to remind them that the scheme has ended and that no relief is due in respect of payments to employees after 5 September 2013.

To discuss this area further, contact Helen Sewell on [email protected] or call Helen on 01527 558539.

Curo Chartered Accountants

Sep 2013

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Act to retain your child benefit and child tax credits

Wednesday, September 4th, 2013

For those still in receipt of child benefit and/or child tax credits, you may be at risk of losing these amounts unless you correctly notify HMRC of your child’s circumstances.

Child benefit stops on the 31st August following a child’s 16th birthday unless they remain in education or training. The same applies to the child tax credit. However, the payments can only continue provided the parent has notified the Child Benefit Office and/or the Tax Credit Office at HMRC.

Failure to notify can result in a reduction in payment or the payments stopping altogether and please note that if you believe you are entitled to receive both payments, you will need to notify both offices. Notifying one office does not count as having notified both!

Here are the rules in more detail. We can help you understand them and are on hand to answer any specific queries you have in this area – contact Helen Sewell on [email protected] or call Helen on 01527 558539.

Curo Chartered Accountants

Sep 2013

Curo Chartered Accountants is based in Bromsgrove, Worcestershire..

Receive Child Benefit and earn more than £50k?

Tuesday, August 13th, 2013

If your net adjusted income is more than £50,000 and you or your partner are in receipt of Child Benefit, you’ll need to register for Self Assessment before 5 October.

The changes were introduced on Jan 7 2013 and from this date effectively remove Child Benefit completely from those with income in excess of £60,000 pa. Those with income between £50,000 and £60,000 will see a partial reduction in their Child Benefit, calculated on a sliding scale.

HMRC is writing to 2m higher rate taxpayers reminding them that if their income is above £50,000 or they received Child Benefit in 2012/13, they need to complete a self assessment tax return for the 12/13 tax year. They will also be required to pay the High Income Child Benefit tax charge through their tax return.

Nearly 400,000 higher income taxpayers opted out of receiving Child Benefit before 7 January and these people are not required to take any further action. A further 600,000 people are expected to be affected by the changes and are being urged to register for Self Assessment as failure to notify on time can result in a penalty.

The government has cracked down recently in a number of areas and is having considerable success in collecting overdue debts from taxpayers, both personal and corporate. ‘Failure to notify’ penalties can be levied where taxpayers fail to advise HMRC about changes which are relevant to the tax position, such as selling a major business asset, new commercial activities or becoming chargeable to tax in the first place.

HMRC will assess if there is a ‘reasonable’ excuse for failure to notify on time and where there is full disclosure and compliance, the penalty may be as low as 0% of the tax due. Conversely, where taxpayers deliberately fail to notify HMRC of their tax chargeable position and also conceal the facts, penalties can be as high as 100% of the tax due.

More information can be found on HMRC’s website or to discuss your tax and Child Benefit position, contact Helen Sewell on [email protected] / 01527 558539.

Curo Chartered Accountants
August 2013

Curo is based near Bromsgrove, Worcestershire.