Tax free perks at Christmas time

This article is our usual reminder of the tax breaks available if you are organising a Christmas party for your staff.

Many businesses take time out to provide their employees with a work based party or similar event. If you are concerned about the tax consequences of Christmas celebrations, read on. We have included in this article ways to organise these events without falling foul of HMRC.

December gives us an excuse to let our hair down and enjoy a well-earned celebration with our work colleagues and partners. The cost of an annual staff party or similar function is allowed as a deduction for tax purposes. However, the cost is only deductible if it relates to employees and their guests, which would include directors in the case of a company, but not sole traders and business partners in the case of an unincorporated organisations. Also, it does not include ex-employees.

If the criteria below are followed there will be no taxable benefit charged to employees:

 

  1. The event must be open to all employees at a specific location.
  2. An annual Christmas party or other annual event offered to staff generally is not taxable on those attending provided that the average cost per head of the functions does not exceed £150 p.a. (inc VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
  3. All costs must be considered, including the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
  4. VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

Merry Christmas…

Disqualified from acting as a director

When a director has been found guilty of mismanagement verging on fraud, one of the remedies that the courts can impose is disqualification as a director. But what does this actually mean?

A disqualified director has to abide to the following restrictions:

  • While the order or undertaking is in force, it stops a person acting as if they were a director. Accordingly, you cannot avoid the order, or undertaking by simply changing the job description.
  • The order or undertaking also means that you must not get other people to manage a company under your instructions. If you do, those people may also be prosecuted for assisting you in contravening the order or undertaking.

The order or undertaking does not stop you having a job with a company, but unless you have court permission it does stop you:

  • Acting as a director of a company
  • Taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
  • Being a receiver of a company's property.

You also cannot act as an insolvency practitioner.

In addition to companies, you must not do any of the prohibited acts in relation to the following organisations: Limited liability partnerships (LLPs), Building societies, Incorporated friendly societies, NHS foundation trusts, Open-ended investment companies, Registered societies and Charitable incorporated organisations.

A disqualification order will not stop you carrying on a business as a sole trader. You could also trade in a partnership, but not a Limited Liability Partnership (LLP).

Keep private bank accounts private

Many small businesses, including landlords, use personal bank accounts to lodge business receipts and make business payments. If traders in this situation are subject to a HMRC enquiry into their business affairs, HMRC would be entitled to request sight of all bank accounts that record business transactions even if those accounts are essentially, personal bank accounts.

As many of the transactions in these accounts are personal, you may need to explain to HMRC where credits to the account came from and provide evidence that the credits are nothing to do with your business.

Without this confirmation or evidence, monies that have nothing to do with your business may be treated as if they are business receipts by HMRC.

Accordingly, if you have let property or a small business, open a separate business bank account and pass all your business transactions through this account. Keep personal bank accounts for personal transactions.

There is nothing worse than trying to remember what the £2,000 credit to your personal/business account was, two or three years after the event, and merely saying that it was a gift from Aunt Mary will not pass muster with the tax office. Inspectors will assume that this is undisclosed business takings or rents.

If you insist on using a personal account for business and personal purposes, then you will need to keep evidence of both personal and business transactions. In our example quoted above this would involve a signed letter from your Aunt confirming the amount and date of the gift made.

HMRC investigators do not have an automatic right to see your personal accounts. In the first instance they will likely be limited to access to business records. Of course, they would like access to your private accounts, as this will evidence more information about lifestyle spending. And so, mixing accounts for business and personal matters will possibly open up investigations unnecessarily.

Keep private accounts private…

Receiving your State Pension if you live abroad

If you are about to move abroad and are already receiving a State Pension in the UK, you might like to read this article setting out some of the issues you will need to consider.

If you live part of the year abroad

You must choose which country you want your pension to be paid in. You cannot be paid in one country for part of the year and another for the rest of the year.

Bank accounts your pension can be paid into

Your State Pension can be paid into:

  • a bank in the country you’re living in
  • a bank or building society in the UK

You can use:

  • an account in your name
  • a joint account
  • someone else’s account – if you have their permission and keep to the terms and conditions of the account

You will need the international bank account number (IBAN) and bank identification code (BIC) numbers if you have an overseas account.

You will be paid in local currency – the amount you get may change due to exchange rates.

When you’ll get paid you can choose to be paid every 4 or 13 weeks and if your State Pension is under £5 per week, you’ll be paid once a year in December.

Delays to payments around US bank holidays

If you live abroad and your payment is due in the same week as a US bank holiday, it could arrive one day late. This is because a US company processes these payments.

Brexit, the outlook for business

The political upheavals of the last week have done little to resolve the Brexit issue, the underlying political manoeuvrings or settle a growing list of issues for small businesses across the UK.

Leaving aside the political considerations we now seem to be at a point where there will be a no-deal, a compromise deal (the so-called Chequers’ plan) or a no-Brexit outcome; all are possible.

Those of us working hard to build a business in the UK will be hard put to take much more of this indecisiveness.

There is, however, something we can all do while these political issues are being resolved. The main question we need to ask is:

What is the worst outcome for my business?

The consensus from most economic think-tanks and informed opinion is that a no-deal outcome would be the least helpful outcome. In which case, if you fit any of the criteria set out below, you may want to create a detailed impact assessment for your business: what are downside risks and how can they be countered.

  • Companies that export to the EU.
  • Companies that import goods from the EU, and
  • Companies that have key customers or suppliers that are dependent on trade with the EU.

With less than 120 days until the 29th March 2019 deadline, we need to consider our options. As we have said before on this blog, we need to get business fit for the Brexit race.

Apart from an impact assessment if you fit any of the above categories, all businesses need to be prepared for a possible downturn in economic activity, especially if no arrangements can be agreed with the EU before 29 March.

We need to take a hard look at our business assets and figure out how we can speed up the conversion of leads into cash in the bank. We need to work smarter.

There are no downsides to this suggested course of action. Even if Brexit produces an amicable outcome for all sides being business-fit will allow you to hit the ground running and outpace competitors who less able to respond.

We can help. Please call if you would like to discuss your options. In some respects, “the clock is ticking” is a worn out cliché, and yet so appropriate at this time.

Are you looking for export opportunities?

In a recent press release, the Department for International Trade promoted its enhanced Export Opportunities service for UK companies.

In a nut-shell, this lists overseas governments and companies that are looking to buy UK goods and services.

On the face of it, if you are looking for a source of leads for your export marketing activities, it’s probably worth taking a look.

Extracts from the press release and the link to find out more are copied in below:

The UK is one of the first countries in the world provide this online service, following the launch of the Export Strategy and an ambitious drive to boost British exports.

Examples on the service include:

  • the Government of Ghana wants UK companies to help build infrastructure and supply vehicles
  • a Dutch education body that wants to buy touch-screen computers from the UK
  • a Hong Kong distributor who wants British cheeses for hotels, airlines and supermarkets
  • a Mumbai distributor who wants British chocolate to sell through its network of suppliers across India
  • a Costa Rican distributor wants to sell Scotch Whisky across the Caribbean
  • the pan-American games organisers in Lima want to buy sports equipment from the UK

 

Discover thousands of export opportunities online today.

 

The Export Strategy sets out how the government will support businesses of all sizes to make the most of the opportunities presented by markets around the world.

A government-led collaboration with business, developed after extensive engagement with a range of UK firms – the Strategy sets a new ambition from the government to increase exports as a proportion of UK GDP to 35%.

It presents a streamlined and targeted offer for businesses of all sizes, set to raise productivity, boost wages and protect employment across the UK.

Research shows that companies that export have increased growth potential, are more productive and have better paid jobs.

Tax Diary November/December 2018

1 November 2018 – Due date for Corporation Tax due for the year ended 31 January 2018.

19 November 2018 – PAYE and NIC deductions due for month ended 5 November 2018. (If you pay your tax electronically the due date is 22 November 2018.)

19 November 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2018.

19 November 2018 – CIS tax deducted for the month ended 5 November 2018 is payable by today.

1 December 2018 – Due date for Corporation Tax due for the year ended 29 February 2018.

19 December 2018 – PAYE and NIC deductions due for month ended 5 December 2018. (If you pay your tax electronically the due date is 22 December 2018)

19 December 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2018.

19 December 2018 – CIS tax deducted for the month ended 5 December 2018 is payable by today.

30 December 2018 – Deadline for filing 2017-18 self assessment tax returns online to include a claim for under payments to be collected via tax code in 2019-20.

Fifty pound note gets new lease of life

The Treasury has confirmed that the £50 note will continue to be part of the UK’s currency, and further, that the Bank of England will reissue it as a new modern polymer note. According to Treasury sources this will help clamp down on crime.

The announcement follows a public consultation and the government has confirmed that the current mix of coins and notes will remain. The move will apparently give us more flexibility over how we spend and manage our money while making it harder for criminals to counterfeit the new note.

Originally introduced in 1981, there are currently 330 million £50 notes in circulation – with a combined value of £16.5 billion. According to the Bank of England, demand for the note is continuing to rise.

The Bank of England has also confirmed that the new £50 polymer note will be printed in the UK to accompany the existing £5, £10 and upcoming £20 notes. This will ensure that the UK’s currency continues to be secure.

Childcare scheme update

The childcare voucher and directly contracted childcare schemes closed 4 October 2018. In time, these schemes will be replaced by the roll-out of the new Tax-Free Childcare: this offers parents £2,000 per year per child towards approved childcare costs. (This is extended to £4,000 for disabled children.)

In a recent article HMRC confirmed the following instructions for employers:

  • Employees who joined a scheme and had the necessary changes made to their salary on or before 4 October, will see no change. Both you and your employees will continue to benefit from any Income Tax exemption or National Insurance contributions (NICs) disregard.
  • Applying to the scheme before the deadline is not sufficient and a new applicant needs to have had the necessary changes made to their salary by the deadline (4 October 2018) in order to benefit from the Income Tax exemption and NICs disregard.
  • If you continue to offer a scheme for new entrants after 4 October, you’ll need to deduct Income Tax and NICs on any vouchers given and pay employer NICs after this date.
  • Your employees need to tell you in writing (for example, by email) within 90 days if they start getting Tax-Free Childcare, so you can stop giving them vouchers and directly contracted childcare with Income Tax and NICs reliefs. If this means stopping or changing their salary sacrifice arrangement, you’ll need to update their contract and your payroll software. Employees won’t be able to return to your scheme once they’ve left.

Parents reading this post can check out what is available to their family under the new arrangements for child care support at https://www.childcarechoices.gov.uk/

Reporting tips for building contractors

HMRC recently published a list of helpful reminders regarding the submission of monthly returns to HMRC. This article lists some of the points highlighted.

Each month contractors must send HMRC a complete return of all payments made to subcontractors within the scheme in the preceding tax month. This is regardless of whether the subcontractors were paid:

  • net of the standard deduction of 20%
  • net of the higher deduction of 30% or
  • gross (you still need to include gross payment status subcontractors on your monthly submission if you pay them in the month even though no deductions have been made from their payments).

This monthly return must reach HMRC within 14 days of the end of the tax month it is for.

You can make your monthly returns using either:

  • the free HMRC CIS online service or
  • commercial CIS software

Contractors who know they won’t be paying any subcontractors for several months should let HMRC know. You can do this by selecting the ‘Inactivity Request’ box under the declarations section of the return. HMRC will make your CIS record ‘inactive’ for 6 months which means you will not need to send any monthly returns (including nil returns) during this period of inactivity. If, however the situation changes during that time and you start to pay subcontractors again, you must tell HMRC.

If you stop using subcontractors within the Construction Industry Scheme permanently or stop using subcontractors but continue to have employees liable to PAYE deductions, you need to tell HMRC and they will update your records to show you are no longer a contractor. Once all the required contractor monthly returns have been received up to the requested date of cessation then no further monthly returns (including nil returns) should be submitted. If, however you start making payments to subcontractors under the Construction Industry Scheme again you will need to advise HMRC.