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Many employed persons are drawn to the idea of running their own business. This short article sets out a few of the pros and cons of this change in status.

The advantages:

One of the major advantages of being self-employed is the opportunity to secure more than one income stream. When employed, we normally work for one employer and thus all eggs are in one basket – lose your job and you lose your monthly income.

Self-employed persons have the opportunity to secure multiple customers – lose one customer and you will lose some but not all of your income.

To some extent, as a self-employed person, you may have more freedom to choose when you work although this can be a double-edged sword, business owners may get demands from clients out of hours and it may be difficult to resist their demands if they are big spenders.

Contrast these advantages with some of the less advantageous demands that may be made if you become self-employed.

The disadvantages:

• As an employee you should have no personal, financial liability for your employer’s debts or guarantees. This may not be the case if you are running your own business. There are ways to organise your business structure to minimise these risks but adopting them comes at a cost.
• You won’t get a payslip and have your taxes and NIC paid by deduction if you are self-employed. You will have to maintain proper accounts and make returns to HMRC to determine your liabilities.
• If your turnover is over the present £85,000 registration threshold, as self-employed you may have to register for VAT and make regular, on-line returns to HMRC.
• You will need to fund any investment required to set-up and run your business.
• NIC contributions by the self-employed may not create sufficient State Pension funding and private schemes may need to be considered.
• Instead of benefitting from benefits attached to employed status: holiday pay, statutory sick pay, most State benefits; you will have to guarantee these benefits for your employees.

Finally, as self-employed, you will have to budget and meet all of the costs associated with your business activity.

How we can help

We have been supporting new business set-ups for a number of years and can help you address all of these concerns. Running your own business may not be for the faint of heart, but with adequate planning and support, setting up and building a business can be immensely satisfying and rewarding.

Please call if you want to explore your options.

Most pundits agree that the growing disruption posed by the Coronavirus outbreak combined with continuing Brexit uncertainty – exactly what will our trading relationship with the EU be from January 2021 – are likely to have a dampening effect on demand and supply; a combination that will lead to a slow-down in global economic activity.

It is doubtful that Budget announcements this week will do much to quell the anxieties of small business owners.

There are concerns about the cost of meeting sick-pay obligations as increasing numbers of employees self-isolate in response to government advice to contain the spread of the virus.

Will business owners be offered more time to pay their taxes?

As the outbreak in the UK is at an early stage expect a staged approach to business support. It is feasible that the government will have to print money – so-called quantitative easing – to cover the funding support required by the UK business community. This is the method used during the banking crisis of 2008 when the banks were the recipients of government’s largesse.

Without a doubt, on its own the Coronavirus poses a significant challenge for all of us and in particular the survival of vast number of a small and medium sized business in the UK, the backbone and engine room of our UK economy.

Fingers crossed that Rishi Sunak and his Treasury advisors come up with adequate support this week. Watch this space for our budget summaries to be published later this week.

The Competition and Marketing Authority has published information recently that points to evidence of potential mis-selling and unfair contract terms in the leasehold housing market.

Their press release is reproduced below:

As part of a probe into the industry, the Competition and Markets Authority (CMA) is concerned that leasehold homeowners have been unfairly treated and prospective buyers misled by housing developers. These concerns include:

• Ground rents: homeowners having to pay escalating ground rents, which in some cases can double every 10 years. This increase is often built into contracts, meaning people can often struggle to sell their homes and find themselves trapped.
• Cost of the freehold: the CMA has seen evidence that people have been misled about the cost of converting their leasehold to freehold ownership. When buying their home, some people were told the freehold would cost only a small sum, but later down the line this price had increased by thousands of pounds with little to no warning.
• Misleading information: not being told upfront that a property is leasehold and what that means. Some developers are failing to explain the differences between leasehold and freehold when directly asked, and some actually tell potential buyers that there is no difference. By the time people find out the realities of owning a leasehold, including the regular charges to be paid, they are often unable to pull out of the purchase, or would face significant difficulties if they tried to do so.
• Unreasonable fees: being charged excessive and disproportionate fees for things like the routine maintenance of a building’s shared spaces or making home improvements. If people want to challenge such charges, the process is often difficult and costly, meaning few people decide to go through with it.

The CMA is now completing all the necessary legal work to launch direct enforcement action against companies it believes have broken consumer protection law. This could result in firms signing legal commitments to change how they do business. If they fail to make the required changes, the CMA could act through the courts to make them comply with the law.

The evidence found by the CMA also supports the case for changes to the law in this area. The CMA will continue to work with the Government on its reform plans for the leasehold market, including supporting the move to ban the sale of new leasehold houses and reduce ground rents for new leases to zero.

As part of its work, the CMA is developing consumer advice for people who own, or are looking to buy, a leasehold property. This will offer tips on what they can do when faced with permission fees and service charges they consider unjustified.

We have reported earlier this year that from 6 April 2020, residential property sales that are subject to capital gains tax will need to be reported to HMRC within 30 days of the sale. Any CGT due will also need to be paid in this 30 day period.

Property sales affected will include:

• a property that you’ve not used as your main home
• a holiday home
• a property which you have let for people to live in
• a property that you have inherited and have not used as your main home

Property sales that will not be subject to this 30 day reporting deadline include:

• a legally binding contract for the sale was made before 6 April 2020
• you meet the criteria for Private Residence Relief
• the sale was made to a spouse or civil partner
• the gains (including any other chargeable residential property gains in the same tax year) are within your tax free allowance (called the Annual Exempt Amount)
• you sold the property for a loss
• the property is outside the UK

Accordingly, if you are contemplating a sale after 5 April 2020, please let us know in advance of the sale. In this way we can gather together all the information required to calculate any capital gain and ensure that returns are made in good time.

There are penalties for late disclosure.

Disposals by non-resident owners

If you are a non-UK resident you must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a Capital Gains Tax liability, within 30 days of completion of the disposal.

You will no longer be able to defer payment of Capital Gains Tax via your Self-Assessment return, and any tax owed must be paid within the 30-day reporting and payment period.

This includes disposals of residential properties, non-residential properties and indirect disposals.

The Insolvency Service has issued a warning that fraudsters have been contacting investors in insolvent schemes claiming to be from the Official Receiver’s office or to have been appointed by the Official Receiver to help recover funds for a fee.

These approaches are always fraudulent.

Official Receivers or any agent legitimately instructed to act on their behalf will never ask you to pay a fee to get some or all of your investment back.

The Official Receiver can only make a return to you as a creditor in failed schemes if it is possible to identify and sell any remaining assets owned by the liquidated company you bought your investment from. All too often businesses of this nature have few if any, assets left to repay creditors and it can take several years to undertake complex asset recovery work and complete a liquidation.

Paying a fee will not make you a priority creditor, meaning you get paid faster or increase the chance of you getting any money back.

If you are asked to pay a fee to get your money back someone is attempting to scam you.

The Official Receiver does not charge investors a fee to get money back and does not employ anyone else to do this on their behalf.

You should report all fraudulent contact from individuals, stating they can get your lost investments back for a fee, to the Official Receivers. You can also report these approaches to Action Fraud.

In a month’s time, 5 April 2020, the 2019-20 tax year expires. After this date many of the options to utilise allowances and claim reliefs to reduce tax for 2019-20 will disappear.

A number of the reliefs to consider are listed below. This is by no means an exhaustive list. Any numbers quoted refer to the tax year 2019-20.

• Have you utilised your £12,000 tax-free allowance for Capital Gains Tax purposes?
• You are entitled to make a number of small gifts that will not be taxed under the Inheritance Tax rules.
• Have you reviewed your pension contributions for 2019-20? According to the pundits, higher rate tax relief may be reduced in the budget next week. In which case, 2019-20 may be the last year to claim those higher rate reliefs.
• If you and your married partner are basic rate tax payers and one of you has not earned enough to cover their basic Income Tax personal allowance – £12,500 for 2019-20 – it may be possible to transfer part of the unused allowance to their partner. Check out the Marriage Allowance.
• Do you have an opportunity to draw up to £2,000 tax-free from your company in dividends? No additional tax to pay. Only applies to the first £2,000 in dividends you take.

The above list does not include other strategies for business owners and many more complex options for high income earners. Please call if you would like us to review any last minute options for you.

What can we expect from the budget next week?

On the expenditure side, infrastructure and the NHS seem to be the two major areas for investment. HS2 and other rail improvements in the North are likely to be beneficiaries as will carbon capture and other climate related projects, for example, improving the energy efficiency of homes, schools and hospitals.

During the last election, the government disclosed that it will not be increasing any of the major taxes and has recently published details of an increase in the NIC threshold, to £9,500.

Corporation tax was due to reduce to 17% (from the present 19%) from April 2020. However, Boris Johnson did state that this intended reduction would be dropped, and the rate maintained at 19%.

There is speculation that higher rate tax relief will be trimmed for contributions into private pension funds from April 2020. This does add weight to the planning option to review top-up payments this month if you pay Income Tax at the 40% or 45% rates.

A cross-party group of MPs has called for a reduction in the rate of Inheritance Tax, from 40% to 10%, together with a reduction in many of the Inheritance Tax allowances and reliefs.

Business rates are another target for relief in an attempt to support beleaguered High Street businesses. Additional support has already been announced for retailers and pubs.

Meanwhile, back at number 11 Downing Street, Rishi Sunak will be burning the midnight oil to prepare himself for his dispatch-box presentation on 11 March. We will be reporting on the outcome of his disclosures in due course.

Pubs will benefit from £1,000 business rates discount from April 2020.

The cut is on top of previously announced plans to slash the bills of small shops by 50%.

In a fresh demonstration of the government’s support for communities up and down the country, a new Pubs Relief will be introduced in April, with £1,000 being taken off the business rates bills of small pubs who qualify.

As many as 18,000 pubs are expected to benefit from the discount.

The relief will come on top of an extended retail discount which smaller pubs are also eligible to claim. Those able to claim both reliefs will benefit from a possible £13,500 off their annual bills.

From April this year:

• small shops and cafes will see their bills halved as the retail discount, currently a third off, is extended to 50%
• music venues and cinemas will become eligible for the retail discount
• a £1,500 discount for local newspapers office space will be extended for a further five years

Regional variations may apply. Check with your local rating authority to see how this announcement will affect your rates bill in 2020-21.

1 March 2020 – Due date for Corporation Tax due for the year ended 31 May 2019.

2 March 2020 – Self assessment tax for 2019/19 paid after this date will incur a 5% surcharge.

19 March 2020 – PAYE and NIC deductions due for month ended 5 March 2020. (If you pay your tax electronically the due date is 22 March 2020)

19 March 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2020.

19 March 2020 – CIS tax deducted for the month ended 5 March 2020 is payable by today.

1 April 2020 – Due date for Corporation Tax due for the year ended 30 June 2019.

19 April 2020 – PAYE and NIC deductions due for month ended 5 April 2020. (If you pay your tax electronically the due date is 22 April 2020)

19 April 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2020.

19 April 2020 – CIS tax deducted for the month ended 5 April 2020 is payable by today.

30 April 2020 – 2018-19 tax returns filed after this date will be subject to an additional £10 per day late filing penalty.

As we approach the end of yet another tax year it is worth reflecting on the role of HMRC in our tax affairs.

Without a doubt, HMRC, tax legislation and its application, will continue to ensure that you pay your taxes. You can rely on HMRC to pounce if they feel that you have underpaid tax. Unfortunately, they may not be so active if there are allowances and reliefs that you could claim to reduce your expose to tax.

The UK tax code, the wealth of legislation that dictates our liability to tax, is amongst the most complex in the global community. Accordingly, tax payers will rarely understand or appreciate the extent to which their activities are creating liability to tax. Unfortunately, in most cases ignorance of the law is no excuse for not complying with the law.

Without reaching a detailed and informed opinion about any significant change in our personal circumstances: our investments, pensions arrangement, business or employment situation, we run the risk that at some stage we will receive the dreaded “brown-envelope” from HMRC.

Very often it is too late to counter these after-the-fact challenges – the planning required to minimise exposure to tax has to be done before the event, before you make the changes.

Our commitment is to ensure that our clients pay just as much tax as is required by legislation, and not a penny more. We are also committed to ensuring that our services are cost effective; that the value or monetary savings we achieve exceed the investment in our time.

Please remember, if you are about to make any change in your personal or business circumstances and you are unsure if the change will impact your tax position, pick up the phone.