With all the political grandstanding and scaremongering over the EU referendum, it was easy to forget that the Chancellor, George Osborne, had a Budget to deliver this week.
It was his fourth Budget statement in 12 months and, with businesses still reeling from the previous three, business support organisations were calling for some calm. The British Chambers of Commerce urged “a steady approach that gives businesses, individuals, and Government itself the time needed to work through existing commitments and reforms".
This was echoed by Mike Cherry, policy director of the Federation of Small Businesses: “In the face of a number of emerging global and domestic pressures, small businesses are looking to the Chancellor to back them through what are set to be challenging times ahead.”
However, this was always going to be easier said than done. The Office for Budget Responsibility is expected to reduce its Budget surplus forecast for 2019-20, with weaker growth and lower tax revenues. If the Chancellor is to stick to his Budget deficit plans, he needs to find money from somewhere.
So what plans did the Chancellor lay out to keep his economic plan on track?
The CBI Director-General, Carolyn Fairbairn, said: “After a year of surprises, this was a stable Budget for business facing global stormy waters. The Chancellor has listened to our concerns about the mounting burden on firms and chosen to back business to grow the economy out of the deficit.
“Businesses will welcome the Chancellor’s permanent reforms to business rates – taking more small firms out of the regime and changing the uprating mechanism from RPI to CPI, which the CBI has long been calling for."
[Updated 16.35, 16 March 2016]
The Chancellor of the Exchequer, George Osborne, announced the 2016 Budget on Wednesday 16 March.
Also see our Budget 2016 summary for small businesses and reaction from small firms and their representatives:
In 2012 the law was changed to oblige all employers to offer a workplace pension scheme to their "qualifying" employees, onto which they would be automatically enrolled.
Businesses with 30 or more employees have now signed up to workplace pensions. The next stage is for businesses with fewer than 30 employees – these firms have an automatic enrolment date from 1 January 2016 to 1 April 2017. The staging date (being the date an employer must begin automatic enrolment) is based on the number of people employed by way of PAYE.
The legislation requires employers to make a minimum contribution of 1% of a worker's qualifying earnings, rising to 2% from October 2017 and to 3% from October 2018.
The employee also has to make contributions of 0.8% of their qualifying earnings, rising to 2.4% from October 2017 and to 4% from October 2018.
Qualifying earnings are currently classed as gross earnings (before income tax and national insurance contributions are deducted) between £5,824 and £42,385 per year. So if an employee earns £30,000 per year the contributions only have to be made on £24,176 (i.e. £30,000 minus £5,824). The qualifying earning levels will be reviewed on a yearly basis.
Employees are divided into three categories - entitled, eligible and non-eligible. These categories are used to ascertain if they are "qualifying" employees. The definition of each of these groups is as follows:
Eligible. These are workers who are automatically enrolled into a pension scheme and for whom the employer has to pay minimum pension contributions. They are workers who fit the following criteria:
Non-eligible. These workers can be enrolled into the pension scheme should they wish to be, and the employer will have to pay pension contributions. They are workers who fit the following criteria:
Entitled. These workers can be enrolled into the pension scheme should they wish to be, but in this instance the employer does not have to pay pension contributions. They are workers who are aged between 16 and 74 earning less than £5,824 per year.
An employee can choose to opt out from the scheme and should do so within one month of being auto-enrolled. Provided the opt-out is made within one month then contributions made by the employee and employer will be refunded by the pension scheme.
If you are unsure of your status, or how your business needs to proceed, it's best to seek professional advice. These changes are enshrined in law and businesses not meeting their obligations, or missing their staging date may face a fine.
Copyright © 2016 Carol Cheesman, principal of Cheesmans Accountants based in Islington, North London.
With 2016 well underway, now is a good time to check in on those business-related new year’s resolutions you made in January. Have you stuck to them?
One key area that all business leaders should be committed to this year - and beyond - is getting their VAT in order. The consequences of poor VAT planning range from an administrative headache to serious financial implications that could close down a company. So what can be done to minimise the risk?
Business leaders often have a good understanding of VAT but if they aren’t handling it day-to-day, then they must ensure that other members of the team understand their responsibilities as well.
In some businesses this lies with the financial director and their team; in others it will be administrative staff that are processing orders. It is not uncommon for different individuals within the same firm to have varying levels of VAT knowledge and to be taking different approaches - introducing standards across the board can help improve consistency and make VAT compliance more simple.
VAT is full of variables and exceptions to the rule, so an awareness of these is vital. This is especially true in sectors such as education and charities, where processing staff may enter purchases as standard rate for VAT and fully recoverable from HMRC without realising that VAT recovery for the cost may be restricted or not possible, potentially costing money.
There are also many exceptions when it comes to entertainment and other business expenses and this is an area that is commonly checked by VAT inspectors. Taking time to understand the ins and outs of VAT recovery and the VAT treatment of supplies will pay dividends in the future.
It is all too common for VAT to become a focal point at the end of a VAT quarter. This can cause multiple issues. Firstly, the due date for the VAT return may have passed which can cause the firm to become liable for default surcharge penalties.
Secondly, if there are unusual/one-off transactions, leaving it until the last minute to seek advice can cause an administrative nightmare as well as unnecessary stress on your staff. Thirdly, you could have cashflow problems if the VAT due is much higher than expected.
These issues can be rectified by keeping a constant check on VAT throughout the year, so that when the VAT return is due for submission it can be quickly and effectively compiled. Any VAT deadlines should be strictly observed, with simple reminders set up on the company calendar.
One effective approach is to assume the role of an HMRC inspector and carry out an audit of your business. To begin with, audit the basics and check whether teams are accounting for VAT on all expenses and income correctly. Complete an audit trail to follow the company processes from start to finish in order to flag up any gaps.
Take a look at the figures to ensure they flow correctly and look for inconsistencies. Also, do sense checks to prevent costly transposition and other processing errors. Do this regularly and you'll avoid nasty surprises when it comes to an official inspection.
By adopting these measures throughout the year, business owners and managers can regain control over VAT planning, preventing it from becoming a burden. As with many business lessons, the key lies in strong organisation and effective processes that are well communicated to everyone within the company and reviewed on a regular basis.
Sponsored post: copyright © 2016 Tamara Habberley, senior VAT consultant, The VAT People.
The self-assessment tax return deadline was 31st of January and if you didn't get your return in on time, you will be slapped with a £100 fixed penalty.
It's important to get your completed return and any tax owing in as soon as possible as further penalties come thick and fast. If you have still not submitted your return and payment by the end of February, you will receive a late payment penalty equal to 5% of the tax owing.
In addition to the penalty, you will also be charged interest on the late payment of any tax owing. Interest starts to accrue from the day after the tax return was due. If you haven't completed your tax return, you won't know how much tax you own and therefore how much interest you will be charged. You may be able to estimate the likely amount you owe using the HM Revenue and Customs estimate your penalty tool.
Completing your tax return should be relatively straightforward providing you have all your paperwork in order. You will need to gather the information relating to any income from employment and records pertaining to any periods of self-employment over the period covered by the tax return including income and expenditure, information on any business use of vehicles and any other income such as capital gains or share profits.
The HMRC online filing system tailors the tax return in response to your answers to a few simple questions. This means you will only need to complete the sections relevant to you and your business. It will also allow you to save any information you have entered so far if you need to go away to find further information or complete it in more than one sitting.
Another benefit of using the online tax return system is that you will know exactly what you owe in tax as soon as you submit your return as the system will calculate your tax bill for you.
You will need a Government gateway account before you can sign in and you'll have to complete your self-assessment tax return. If you do not have a Government gateway account, you will need your unique taxpayer reference and National Insurance number in order to set one up.
You will be sent an activation code once you have entered your details. However, this can take up to a week to arrive - further delaying your tax return and ramping up your interest.
If you still have not submitted your return by 1 May, HMRC will charge you £10 per day for each additional day the return is late. And if you have still not submitted it after six months, you will be landed with a minimum £300 fine or 5% of the tax owning - whichever is greater. So the advice is, act now if you want to avoid further interest and penalties.
If January is not already gloomy enough, for many there's also the daunting prospect of completing an online self-assessment tax return (SATR).
The good news is that not everyone needs to complete one. But for those who do, it's not always straightforward and there are penalties if you fail to submit your SATR on time, or if HMRC take the view that not enough care has been taken in completing it.
That said, if you make a mistake on your self-assessment form you've normally got 12 months from January 31 after the end of the tax year to correct it. This is an amendment. In other words, for the 2015-16 return you have until 31 January 2018 to make an amendment.
But what are the most common mistakes that people make?
To avoid this simple schoolboy error, stick a post-it on your desk reminding you to sign and date box 22.
The UTR is a ten-digit reference number. It is unique to you and you will find it on every piece of correspondence you receive from HMRC. Your National Insurance number is also unique to you. It is made up of numbers and letters, and you will find it on payslips or on a P60. Be sure to be accurate when including this information.
The paperwork sent by HMRC includes a guide to completing your tax return. It's very clear and takes you through the process step by step.
Notes such as Info to follow or As per accounts will not be accepted by HMRC. A self-assessment tax return with these types of notes is not a completed document and will not allow you to avoid the penalties HMRC can impose.
At the very least, double-check your calculations. It's important to be accurate.
Failure to declare all relevant income and any Capital Gains can result in severe penalties. If those errors are deliberate (for example: omitting a source of income) you could be prosecuted.
If you have additional income, you will need to include supplementary pages. This additional income may come from playing in a band at weekends, or perhaps your erotic fan-fiction has become a best-seller, or it could be from investments, property or shares. Make sure you include all additional income on the supplementary pages.
There may be things you assume can be claimed, but in fact can't. Check with your accountant as there are costly penalties for incorrect claims; and besides, there may be things you hadn't thought of that can be claimed.
Don't leave things to the last minute. The deadline for submitting a paper return is 31 October following the end of the tax year. The deadline for submitting a self-assessment tax return online is 31 January after the end of the tax year. If you miss these deadlines, there are penalties to pay.
The easiest way to reduce stress is to be organised about keeping proper and complete records. The paperwork you will need (where relevant) includes:
If you are self-employed you will also need:
It's perfectly possible to complete a self-assessment tax return without the help of a qualified accountant or tax adviser, but hiring a professional will ease your workload and offer comfort that the submitted forms are accurate and complete.
Copyright © 2016 Carol Cheesman, principal of Cheesmans Accountants based in Islington, North London.