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So far Sadia Ajaz has created 39 blog entries.

Amending MOSS VAT Returns

Guidance issued on MOSS VAT Returns by HMRC
HM Revenue and Customs (HMRC) has updated its guide on its Mini One Stop Shop (MOSS) scheme. The guide explains how businesses can correct VAT MOSS returns.

The MOSS was introduced to simplify compliance with the January 2015 change to EU place of supply rules, which have required companies that provide broadcasting, telecommunications, or electronic services to account for VAT in the location of the consumer. Businesses have to file a MOSS VAT Return 20 days after the end of each calendar quarter.

The first deadline was 20th April and the next deadline is 20th July. HMRC has said that businesses can amend their VAT MOSS Returns by submitting a correction to the original return using the online service.

Changes to MOSS VAT Returns can be made up to 3 years and 20 days after the end of the relevant period.

In order to reduce VAT liabilities businesses should ensure that their bank details are up to date before correcting a return.

Speak to Avery Clifton about amending Moss VAT Returns

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Tim Healy v HMRC – Claim for renting a flat

Crackdown on duality of purpose – Tim Healy v HMRC
The decision in Tim Healy v HMRC [2015] TC04425 , published in June 2015  has shown how tax payers should demonstrate that their expenses are solely for the purpose of the trade.
The Claim

In this case, an actor failed in his claim for tax relief for renting a flat whilst working away from home. He inadvertently claimed the three bedroom flat was required not only required for business use, but to accommodate guests as well, which meant that the expense was not “wholly and exclusively incurred” for the purpose of his business.

In 2012 the case was heard by the First Tier Tribunal  and had decided in the actor’s favour. In 2013 HMRC appealed to the Upper Tribunal on the grounds that the law had been misinterpreted and the case was sent back to the First Tier Tribunal.

The Facts of the Case
The facts of the case were that Mr Healy was an actor based in Cheshire and was casted in a West End musical. When the show went live in March 2005 , he rented a flat in London as it was cheaper than renting a hotel.  The rent was for a 12 month contract with a 6 month break clause. He terminated the lease when he finished the musical contract.

HMRC disallowed the rental expenditure on the basis that the rental term was for a year, stating that a taxpayer cannot obtain tax relief on rental accommodation as the costs of living are private costs.
The Law
Section 34 of the Income Tax (Trading and Other Income) Act 2005 states that:

(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion […]

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Queen’s Speech 2015

Commentary on Queen’s speech 2015
Following on from the Queen’s speech on 27th May 2015, the Association of Chartered Certified Accountants (ACCA) has stated the Queen showed a strong tone for tackling tax avoidance, tax evasion, economic stability and job creation.

Several individuals from ACCA’s offices have commented on the Queen’s speech 2015.

The ACCA’s Head of Tax, Chas Roy-Chowdhury stated “Tackling unacceptable tax avoidance and tax evasion forms a strong pillar of the Government’s economic plan.”

“We are particularly pleased to see the Government’s five year tax lock – this is an interesting move, with no increases in VAT, National Insurance and Income Tax during the lifetime of this Parliament. This is a policy aimed squarely at tax stability, but we also want to see this lock applied so that tax allowances and reliefs are not decreased, such as pensions tax relief.”

Andrew Leck, who is the Head of Western Europe at ACCA commented on the Jobs and Enterprise Bills, stating “We welcome the Government’s commitment to creating 3 million new apprenticeships, and its agenda to find a further £10 billion worth of cuts to red tape for business.”

“The details of both bills will be essential for ensuring business has the means to invest and grow and that businesses large and small are able run workable apprenticeship schemes. We also welcome the Government’s plans for SMEs, especially their creation of a Small Business Conciliation Service to help with disputes and late payment.”

Mr Leck also expressed views on policies for Scotland and Wales, stating: “This Queen’s Speech also deals with two areas which will no doubt define David Cameron’s legacy – Scotland and Europe. Both are set to receive a transfer of powers, in Scotland’s case given ‘devolution max’ is […]

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Tax Freedom!

 Tax Freedom for individual taxpayers is two days later in 2015

Taxpayers in the UK are working two days longer on average in 2015 before they start earning for themselves, the Association of Chartered Certified Accountants (ACCA) has stated.
Research by Adam Smith Institute  has found tax freedom day is two full days later than last year. Tax freedom is calculated as the date taxpayers stop paying taxes and start earning for themselves.  This tax freedom day fall on 31 May in 2015.

The tax freedom day has been increasing steadily over the years. Due to the overly complicated tax system in the UK and the numerous indirect taxes that exist, UK tax payers are paying more and more to the government, even after five years of increases in personal allowances.

Chas Roy-Chowdhury, Head of Taxation at the ACCA said: ‘The rises in the personal allowance have created a huge amount of fiscal drag. More and more people are being caught in the 40% tax bracket. At the end of the 1980s only 500,000 people were paying the higher rate of tax, now that is more than four million people. So despite all the Government hype on increasing the personal allowance we are actually two full days worse off this year before our income is ours to keep.

‘Despite large cuts to the public sector the government is needing more and more money to keep public services going, a bill that has to be paid for by all UK taxpayers. Individuals are well within their rights to take steps to legally reduce their tax burden. ISAs are the perfect example of one method they can use.’

Other steps include:

Claiming all benefits and allowances: Taxpayers’ money is ploughed into a wide variety of state benefits […]

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Holiday pay – Contractors falling foul of IR35

Contractor getting caught by IR35 Rules successfully claimed for unpaid holiday pay
The Employment Appeal Tribunal upheld a judge’s decision that a general labourer, who was employed for four years before becoming a labour-only subcontractor for the same company, was a worker for the purposes of the Employment Rights Act 1996 and the Working Time Regulations 1998 (SI 1998/1833). The tribunal therefore had jurisdiction to hear his claims for unlawful deductions in respect of unpaid holiday pay.
The Case
 In Plastering Contractors Stanmore Ltd (PCS) v Mr P Holden (UKEAT), Mr Holden a self-employed sub-contractor claimed holiday pay and won.

His task involved general labouring, clearing sites and transporting equipment between sites. He was contacted by a manger who would provide him work at a number of sites.

Mr Holden was paid by price or time and no sales invoices were raised by him prior to him receiving payment. There was no obligation for Mr Holden to be offered work or to accept it. He worked almost exclusively for PCS for 16 years. There was no marketing initiative from his side such as researching other contracts. He did not provide a substitute when he could not work due to his wife’s appointments, even when he had the right to do so. All protective clothing, with the exception of safety boots was provided by PCS.

Therefore Mr Holden was not a client of PCS  but rather he was integrated into PCS’s  business.

As work from PCS dwindled, Mr Holden left the company without giving any notice.
The Legislation
In order for his claim for holiday pay to succeed it was necessary for Mr Holden to establish that he was a worker by virtue of the Working Time Regulations 1998 (WTR) and the Employment Rights Act 1996 (ERA).

Regulation 3(1) of […]

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Micro Businesses Fast Payers

Micro Businesses are Fast Payers
Micro businesses tend to be the fastest to pay their invoices out of all sizes of business in the UK, according to new research.

Data from Experian shows that businesses with 2 workers or less paid overdue invoices within an average 20.58 days beyond the contract terms in 2014/15.

This is half a day quicker than in 2013/14 and almost 4 days quicker than the national average of 24.29 days.

Large businesses with more than 500 employees took an average 34.18 days to pay overdue invoices in 2014/15. This is the slowest in the country and more than 10 days above the national average.

The data shows that all business sizes improved their payment times in 2014/15 from 2013/14:

micro businesses with 3-5 employees saw the biggest improvement in payment time, falling from 22.64 to 21.34 days
firms with 26-50 employees paid an average 24.11 days late, down from 24.77
large businesses cut their average late payment time from 35.25 to 34.18 days
the national average dropped from 25.28 to 24.29 days.

Max Firth from Experian, said:

“The improved payment performance shown by businesses of all sizes in the last tax year is an encouraging sign for the economy. Cash flow is especially important to SMEs. Late payments can hinder their profitability and growth prospects, while also having a knock-on impact on suppliers.”

 

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General Election Pledges

General Election Pledges by the Parties
With the General Election round the corner, below are the key points made by the major parties regarding taxation.
The Labour Party’s General Election pledges:

 Introducing a new 10p rate of tax
 Re-introducing the 50% top rate of income tax for people earning over £150,000
No rate increases of Income Tax, National Insurance or VAT
Abolish the controversial non dom status
Review of HMRC’s working practice and culture
Extra powers provided to Scotland so they can make more decisions over tax
Introducing mansion taxes on properties worth over £2m

The Conservative Party’s General Election pledges:

Increasing Personal Allowances to £12,500
Increase the 40% higher rate tax threshold to £50,000
No rate increases in VAT, National Insurance contributions or Income Tax
Married couples to be allowed to transfer their personal allowances of up to £1,060 to their partner, where both partners are basic rate tax payers
Increase the annual non dom charge
Inheritance tax threshold for married and civil couples to rise to £1m

Liberal Democrats’ General Election pledges:

Increase Personal Allowances to £12,500
Consider raising the employee National Insurance threshold to the Income Tax threshold
Set a target for HM Revenue and Customs to reduce the tax gap and continuing to invest in staff to enable them to meet it
Introduce a new offence- corporate failure to avoid economic crime. Introduce penalties for directors and custodial sentences
Increase annual non dom charges
Reform Capital Gains Tax and Dividend Tax relief
Introduce a High Value Property Levy for properties worth more than £2m throughout the UK
Allow Local Authorities to allow council tax of up to 200% on second homes

Green Party’s General Election pledges:

Increase the top rate of income tax to 60%
Increase staff at HMRC by 15,000 per year
Introduce legislation to reduce the tax gap
Replace Council Ta and Business rate with a system of Land […]

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Do Small Businesses Value Business Plans

Business Plans for Small Businesses
Up to 29% of small and medium sized businesses fail to see a reason for preparing a business plan, following research undertaken by Close Brothers Business Barometer, which takes into account views of small and medium sized business owners along with senior management.

Worryingly, 43% of those who do not have a business plan admit they don’t see it as necessary and 20% state they keep business plans in their head. 15% claim having a business plan is not a priority for them.

Those businesses that do have a business plan, a surprising 40% review them at least once a year, with 20% reviewing it every two years.

Although having a business plan is important, it is only useful if it is reviewed regularly and reflects the ambitions of the business, current and future trends and realistic targets are set, bearing in mind the economic and industry challenges. Regular SWOT analysis (strength, weaknesses, opportunities and threats) should be undertaken and the findings should be implemented and regularly followed up. Otherwise reviewing a business plan

becomes another task undertaken by the business with no meaningful outcome.

The CEO of Close Brothers Asset Finance, Mike Randall stated, “It is somewhat concerning that so many small and medium-sized firms do not have a business plan as without clear direction, they may be missing out on opportunities for growth and not realising their full potential.”

“Planning is key to any business throughout its lifecycle. A formal plan can be an extremely valuable tool for managing and growing a business as it allows a company to recognise its strengths and weaknesses and ensure they have appropriate plans in place.”

‘Of the companies we talked to that do have a business plan, the majority said […]

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Small business stresses revealed

Small businesses stresses revealed
A poll of 600 small businesses has revealed 32% of small business owners find hiring new staff as the most stressful task they have to deal with.

Other tasks which affect the stress levels of a business are:

 31% stated moving business premises
27% stated handling finances
19% stated dealing with staff absences
13% stated dealing with customer complaints

The stress of moving business premises
The research by E.ON found three quarters of small and medium-sized companies delay moving premises because of the stress. In addition, small businesses have lost on average of 7.5 working days due to moving premises.

The findings from the research revealed the actual cost of moving and upgrading, as well as the losses caused due to disruption of business came out as £40,000, over a five year period, or 2.5% of their annual turnover.

This hassle, as seen by small business owners has lead to more than 75% of small businesses delaying moving, have to compromise with “cramped, dilapidated, expensive or inefficient buildings”.

Comments from business owners included worrying about the cost of moving, not knowing where to start and being unable to deal with transferring service providers.
Comments from E.ON
The business energy director, Anthony Ainsworth at E.ON stated:

“To hear that more than three quarters of SMEs are staying in potentially inappropriate premises because moving is considered just too hard is surprising. The disruptions businesses face are a very real barrier to relocation and possible future growth.”

E.ON has released some tips on making sure small businesses have a stress free move. Their suggestions include:

Making regular visits to the site with other members of staff, so all are aware of the layout and visualise where assets can be placed.
Ensure utilities are working and all current services providers and contacted […]

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Success of a business

Success of a business
Numbers, decisions and seeing the big picture; some factors which contribute to the success of a business.

Businesses need to know different numbers, not just numbers extracted in Real Time, but other figures which are forecasted such as budgets and predictions. Not only do businesses need to keep an eye out on their own figures, but knowing the figures and benchmarks of the industry they belong to is also important to remain competitive.

A decision can only be made when all the numbers have been analysed, especially for those decisions which affect expansion programmes and obtaining extra finance. Having real time information at your disposal is imperative to making the right decision. Therefore having the right figures in front of you is essential in making the right decisions leading to success of a business.
Legal Requirements
Directors have a duty to ensure the company is meeting the legal requirements set by statue. Accountants can advise on how to achieve these duties and can point them in the right direction, however the overall duty remains with the directors. There are legal requirements for nearly all transactions undertaken by a company; from paying a salary, issuing dividends, paying interest on loans and treatment of VAT on expenditure. Knowing when to convene meetings, when notices should be issued, treating minority shareholders correctly; these are some of the issues directors have to be aware of.

Where directors are following the legal requirements, it follows that the business is heading in the right direction.
Record Keeping
With cloud accounting on the uptake by both businesses and accountants, the availability of Real Time information has never been easier. There are many cloud accounting providers on the market which simplify the steps taken to record a transaction. […]

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