While we all wait for George Osborne to tell us what he's actually going to do, it seems that with a variety of leaks and sure-fire predictions, there are unlikely to be many surprises. Here's a quick summary of what's come our way so far this morning:
Alistair Bingle, managing director of Bishop’s Move comments on the fuel duty price freeze: “The past 12 months has brought good news to businesses that rely on the roads on which to operate. By announcing that there is a firm commitment to the fuel duty freeze up until the next election then this gives industries, such as haulage, the breathing space in which to plan and grow over the next 18 months and thus, create more job opportunities. This news is welcomed by our industry and, as the housing market picks up, we can now simply focus on getting Britain moving once more.”
Peter Burgess of Retail Human Resources comments: “There are various reasons why the rise in personal allowance has happened; firstly the next election will be fought on the cost of living - Labour’s trump card. By lifting the working poor out of tax the Tories are supporting the lower paid bracket yet at the same time will seem appealing to middle class families. Secondly, I am confident this is welcomed by the Liberal Democrats and Mr Osborne may have even see this an opportunity to steal their thunder."
Julio Vildosola, CEO of Liquid Finance, predicts: "It is likely that the Government will pledge to help small businesses which will continue to strengthen confidence in a previously hard pressed, but critically important sector of the UK economy. Recently we've seen an increase in demand for funding to assist with investment in small and independent businesses, which indicates that there is pick-up across this huge sector. This is good news for both individuals making a living out of these small and micro-businesses, as well as the suppliers to them and their employees."
Meanwhile, it seems likely that the state pension is moving further off for under 49-year-olds who will have to work until they're at least 68. The under-7s fare better with a predicted free school meal scheme being brought in.
For small businesses there might be good news if the Chancellor removes Employer National Insurance Contributions, saving businesses money and offering an incentive to employ more staff.This one is being much talked about, but with less confidence. We'll have to see if this is just wishful thinking or if small businesses will have something to celebrate in time for Christmas.
Have a look at our round-up of the Chancellor's Statement to see how close our fortune-tellers were.
The Chancellor will be making his Autumn Statement tomorrow.This statement is typically a report on the progress of the economy as well as an opportune moment to announce immediate or future tax changes.
One major issue for all small employers is employers’ National Insurance Contributions, more technically called Class 1 Secondary NICs. These taxes are paid only by employers and they are effectively a tax on employing individuals.
On all salaries above £7,696 pa, an employer will be required to pay HMRC an additional 13.8% NIC to HMRC. Employing a new worker therefore costs 113.8% of their gross salary. This is in addition to the tax and NIC collected from the employee’s PAYE salary each month. As a result, this NIC charge is in effect discouraging small and medium sized businesses from taking on more staff.
The economic success of most developed nations substantially rests on confidence. How confident groups of individuals are about the future, their ability to earn enough money to support their family and their lifestyle. This being the case, the chance of finding and or retaining employment is key to so much of this confidence.
Most small companies would consider taking on more workers, or increasing the hours of existing workers if the NIC rate was lower. In fact, three years ago the rate was 1% lower. After all, the more employees each business has, the more likely they can increase their turnover by producing more goods or providing more services.
The economic argument is clear. Reducing unemployment saves money in benefits. The salary earned by those individuals is still liable to income tax and employees NIC, sending some money back to the Chancellor. In addition, when it comes to spending the money they have earned, most purchases will be liable to VAT at 20%, sending even more money back to HMRC. This in turn results in increased profits for companies, which in are also liable to tax.
No doubt the Chancellor will have been doing his own sums approaching his speech, but a cut in NICs could be the early Christmas present most small businesses are looking for.
Blog supplied by Nick Tagg of Wisteria Accountants
Update: Have a look at the Start Up Donut's summary of the Autumn Statement.
A collection of letters and numbers make up our tax codes. Often overlooked or ignored, most of us don’t check our codes or even know what they stand for. But with HMRC admitting that 3.5m people paid too much tax in 2012-2013, maybe we should.
With all this confusion how can we be sure that we are paying the correct amount of tax? A tax code can provide you with information regarding how much money is been taken by the taxman – that’s if you know what all the letters and numbers stand for
Tax code mistakes can arise through moving jobs, which often involves incorrect data being passed on to new employers. HMRC itself is a factor in this confusion, because millions of incorrect PAYE codes have been issued. Furthermore, second jobs and tax on savings can also skew or invalidate tax codes, which can lead to over/under payments of tax.
Unfortunately, the majority of people don’t question their tax codes, they trust HMRC’s calculations. But by checking your tax code, as well as filing all the necessary returns to HMRC, you should be able to avoid overpayment. You never know, you might even earn yourself a welcome tax rebate.
Blog supplied by Andrew Millet of Wisteria Formations. You can follow him on Twitter at @WisteriaLtd.
The UK is holding its first ever Small Business Saturday on Saturday 7th December – traditionally one of the busiest shopping days of the year. An established event in the US, the aim is to help encourage and promote trade among smaller businesses in the UK in the run up to Christmas.
As part of this HM Revenue and Customs (HMRC) have set up a day of free live webinars for start-ups and small businesses on topics such as business expenses for the self-employed, VAT awareness and your responsibilities to HMRC as a company director.
The webinars are an hour long and will be running throughout the day. Business are being encouraged to take part by pre-registering on the HMRC website and submitting questions in advance to be answered on the day.
Follow the links below to pre-register for the seminars and submit your questions.
10am to 11am Saturday 7 December
This session concentrates on the information sole traders or partnerships need when they start. It covers registration, National Insurance, Self Assessment and record keeping.
12pm to 1pm Saturday 7 December
This webinar is aimed at businesses considering setting up as limited companies. It provides the basics on incorporation and registration with Companies House and HMRC. It also looks at when companies become an employer, and the timetable for paying Corporation Tax online.
2pm to 3pm Saturday 7 December
Sole traders or partnerships need to know which day-to-day expenses they are able to claim for tax relief. They also need to start keeping records of these as soon as the business starts. This webinar provides an overview of the most common expenses, including motoring costs.
4pm to 5pm Saturday 7 December
New businesses are often worried about VAT, what it is and when they need to register. This webinar answers these questions and explains in simple terms how VAT works.
EU VAT rates vary from state to state. This has the potential to cause a headache for businesses with operations in different countries, at least from a VAT registration and reporting perspective.
With many VAT managers at large pan-European organisations advising that tax and the impact it can have on your bottom line be fully integrated into budgeting and planning, the first step in the smooth running of an effective cross-border operation is to be aware of differing EU VAT rates and various rules and regulations that apply in each member state. Here, then, is an introduction to VAT and compliance in core markets across Europe. Each country is marked for ease of doing business from a VAT cost and compliance perspective out of 10, with 10 being the easiest and 0 being the hardest.
With a standard VAT rate of 20%, Austria represents a rather similar environment to the UK when it comes to doing business. Suppliers of certain types of services such as food, books and accommodation rental can enjoy reduced rates of either 12 or 10%, dependent on the specifics. Reporting requirements are relatively loose and like a lot of other EU countries tax recovery is restricted on business expenses such as cars, hotel accommodation and business equipment. The country’s intrastat threshold is set at €550,000 for both dispatches and arrivals.
With a rate of 19.6%, returns from French business are likely to be a touch higher than in the UK. On the downside, there is no VAT registration limit for either established or non-established businesses, meaning that every single trading entity is liable to VAT. Having said this, the country enjoys attractive reduced rates of 7 and 5.5%. A bonus for organisations setting up in France is that use and enjoyment rules have not been implemented, meaning that by outsourcing the supply of goods such as telecommunications outside the EU, you will not incur VAT on those services.
The German economy is one of the EU’s strongest thanks to a booming manufacturing industry that boasts the likes of BMW, Porsche, Volkswagen and Audi. With a standard rate of 19% and reduced rate of 7% the cost of VAT in Germany is manageable, however tax recovery is not possible on certain goods such as cars, luxury good and business gifts. There is, though, the option to enjoy an annual VAT return period.
Known less for its economic prowess than its position at the summit of the EU VAT rate table, Hungary’s standard of 27% is enough to put a lot of businesses off trading within its borders. In addition, a business established in a country outside the EU must appoint a tax representative in order to qualify for VAT registration to do business in the country. Any businesses turning over more than approximately £14,500 a year must be registered for VAT, meaning that even very small businesses find a hefty impact on their bottom line.
Whilst the standard rate of 21% is quite high, a reduced rate of 6% makes it attractive to businesses including those offering food and drink, books or newspapers and hotel or restaurant services. Like France companies are able to enjoy annual VAT return periods. You might want to try and keep employee expenses to a minimum though as you aren’t able to claim back VAT on restaurant meals, alcohol or tobacco.
The huge benefit to doing business in the UK is that many businesses are zero-rated and therefore exempt from paying VAT. For example, education and training services, insurance, finance and credit are exempt, making it a good place to operate a financial organisation. As a business, you can also turnover up to £70,000 before you must start paying VAT, meaning that a very small business such as neighbourhood coffee shop staffed by one or two employees may be able to make big savings. The standard rate is 20%, with the aforementioned zero-rating for certain businesses and 5% for others.
Blog supplied by Oliver Robertson from EU VAT specialists Accordance.
Further reading: International trade
There's also a useful tool on EU VAT registration