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Welcome to the first edition of The Q for 2020. We are delighted to say that in July 2019 we took over a number of clients from Haines Watts Basingstoke, as they closed their offices at the end of their lease. As part of this, Donna Sharp has joined our team, who I am sure many of you have already spoken with. Let me take the opportunity to welcome all of you who have joined the Black & White family!
In other news, we are working hard on a website redesign, with much thanks to CLD, so watch this space. We will also continue to be active on Facebook, Instagram, LinkedIn, Twitter and YouTube, with more regular updates available on our blog page. Our latest four blogs include:
• Pre-Year End Tax Planning Opportunities 2020;
• Top 5 SME Challenges in 2020;
• Cash; Death or Evolution?; and
• Is your best friend tax deductible?
If you have any topics you’d like to see covered, please contact us HERE. Upcoming topics in future Newsletters include: Changes to VAT in the Construction Sector (October 2020 onwards), MTD and Strategic Partners, to name but a few.
IR35
It appears that there will be no watering down or delay in the planned changes here, effective from 6th April 2020. The Government review seeks only to ensure the changes are implemented “as smoothly as possible”. Here, contractors working through Personal Service Companies for Medium and Large end clients’ will have their IR35 status established by their end clients’, in line with the previous changes to the Public Sector. Small end clients’ remain outside the scope of these changes.
We have already seen some big changes in recruitment in this area, with several large companies including Barclays, HSBC, Lloyds and GlaxoSmithKline telling sub-contractors to go on payroll or leave. Research suggests that half of contractors plan to leave clients in the next eight weeks, costing the UK economy £2.2bn.
If you are (potentially) impacted by this, we would have expected your end client to have contacted you by now to discuss further, but approximately 28% of contractors are still waiting to find out their status. If they have and you would like our support in calculating what is best for you going forward, contact us today.
Optimal Salaries & Dividends
Given the recent political circumstances, the following is based on the latest information. However, this could change in the upcoming Budget and if this is the case, we will contact you accordingly.
As things stand, the two options from an optimal salary perspective for 2020/21 are:
• £9,500 per annum (£791.67 per month) for Director-Only businesses; or
• £12,500 per annum (£1,041.67 per month) where you employ staff other than the Directors or have cashflow/reserve issues. Please note the second of these is inline with 2019/20.
Assuming you have profits after tax available to declare as dividends, the other bands remain unchanged, with the 0% band remaining at £2,000, the 7.5% band remaining at £37,500 and the higher and additional rates also unchanged. When we do your accounts, we’d be delighted to provide you with a bespoke calculation to outline your options and the tax implications, so you can make the best decision for you.
Capital Gains Tax Changes (CGT) from 6 April 2020
If you are looking to sell a residential property in the next year or so, please read further. Essentially from 6th April 2020 onwards, capital gains for individuals will be stripped out of the self-assessment system, with it instead becoming a standalone report, with payment now required within 30 days of completion (rather than 10 to 22 months). You will have to make an assumption up front what rate you will be paying tax at and therefore how much your capital gain will be, then report it on your self-assessment tax return, which can be used to confirm if you paid the right amount of tax.
There will be big interest and penalties on individuals who underpay the tax here, so many are going to assume the higher rate of tax and then look to reclaim in their next tax returns. If this will impact you or anyone you know contact us HERE today, so we can talk this through with you. We will expect there will be some who look to sell in advance of this date to avoid being caught under these changes, although they haven’t been widely reported to date.
Whilst on the subject of buy-to-lets, don’t forget only 25% of the interest on mortgages is deductible, when calculating profits, for 2019/20 and 0% is deductible for 2020/21 year when owned by individuals and partnerships. Instead, an alternative relief is available if you’re not a higher rate tax payer.
Navigating the changes in Capital Gains Tax (CGT) from 6 April 2020 demands careful consideration. If you’re planning to sell a residential property, the shift to a standalone report requires upfront assumptions about tax rates. Seeking advice from a seasoned self-assessment accountant can be pivotal in ensuring compliance and avoiding potential interest and penalties.
Brexit, Budget and Making Tax Digital (MTD) Update
Whichever side of the argument you were on, at least with further certainty appearing on the horizon, there are some signs that confidence is returning to business. Ultimately the real negotiations are yet to commence with the EU and indeed other foreign governments, all of which will impact the economy, how we do business and the accounting and tax worlds. If you want to talk further about how the difference scenarios might affect your business, get in touch with us today HERE.
Despite the recent surprising change in the Chancellor to Rishi Sunak, the Budget appears set to go ahead on 11 March 2020. Watch our blog page for a summary of this as the headlines are announced.
MTD continues to create opportunities and cause problems for VAT-registered businesses whose threshold exceeds £85,000. It is a question of ‘when’ rather than ‘if’ this will be rolled out on other taxes. The next three groups likely to be impacted will be:
• VAT-registered businesses with turnover less than £85,000;
• Corporation Tax; or
• Income Tax.
However, as none of these have been consulted on yet, it is likely they will not take place before 2021 at the earliest. However, in our current political climate, anything is possible. One thing is for sure, we will keep you up to date with all the latest news and timelines.
Power of attorney Wills and Trusts
Do you and your loved ones have Wills and Lasting Powers of Attorneys (Health and Wealth)? If not, speak to us HERE today, as we’d be delighted to ensure you have everything in place for whatever there is to come.
Information Commissioner’s Office (ICO)
The ICO is an independent regulatory office dealing with the Data Protection Act 2018 and the General Data Protection Regulation, amongst others. We are seeing increasing numbers of client’s receiving letters from them demanding that they become members and pay their annual fee of £40 to £2,900, depending on the size of their business.
This is not a letter to ignore; either call them and tell them you do not need to be a member; or go online and register using the link in the letter. If you hold personally identifiable information on supplies and customers as defined under the Data Protection Act/General Data Protection Regulation you will need to register.
Research & Development (R&D) tax credits
These are not only one of the most generous reliefs for Small & Medium Enterprises, but they are also still one of the easiest ways to reduce your corporation tax (additional 130% deduction, in addition to the original claimed cost), or claim cash back (at 14.5% where losses are being made) where the business seeks to advance science or technology, or has projects or activities that help resolve scientific or technological uncertainties. Is this you? If so, please get intouch with us today HERE so we can discuss the potential for your business.
Manufacturing and Marketing are two sectors where a case can be clearly put forward to HMRC, but there are many other sectors where it could apply, where you are creating innovation. For example, in the Construction sector, some examples of innovations which maybe used to claim R&D tax credits could include managing challenging ground conditions, building on older structures, ways to meet newer “green” regulations, or doing one-off/bespoke designs.
Should your company invest in an electric car?
Historically when a company invested in a car, it was difficult to claim back the VAT and it could create a P11D or Benefit-in-Kind (BiK) for the Director’s/employee’s in question, inevitably giving rise to additional tax charges. The BiK is a function of a number of factors, including the level of CO2 emissions and the list price of the car.
However, from April 2020, savings on pure battery and efficient plug-in hybrids will dramatically increase. For example, 0 g/km CO2 emissions will fall from 16% BiK in 2019/20, to 0% 2020/21, 1% in 2021/22 and 2% in 2022/23: If we take the Nissan LEAF Visia 40kWh, which has a BiK value of £27,235 and 0 g/km CO2 emissions, in 2019/20 this would create a £4,357.60 BiK yielding a tax charge of £871.52 to £1,960.92 per year, depending on whether the beneficiary is a basic or additional rate tax payer.
From 6th April 2020, the BiK value will fall to £0 in 2020/21, £272.35 in 2021/22 (yielding a tax charge of £54.47 to £122.56, depending on tax rate) and £544.70 in 2022/23 (yielding a tax charge of £108.94 to £245.12, depending on tax rate).
If you are interested in purchasing a new car through your limited company, get in touch with us today HERE for further support and calculations to ensure you make the right decision for you and your business.
Fee protection
The fees in dealing with HMRC enquiries are typically £3,000-£5,000 + VAT, even if you haven’t done anything wrong. You protect your business against the unexpected, with contents, employment, equipment, life and property insurance, to name but a few; so why not have insurance for a HMRC enquiry? Clients who took out the policy last year will automatically receive an invoice for the renewal of this service.
If you are interested in taking up this service, but haven’t previously done so, please contact us HERE for a quote. Our policy this year also includes 24/7 365 days a year for:
• Employment;
• Health & Safety; and
• Commercial Legal support lines.
Former clients of Haines Watts should have already received separate communications on this, due to the different policy dates. However, if this is you and you haven’t, please contact us HERE for a quote.
Refer a Friend?
You may be aware that if you refer a friend or family member to us, once they have signed up with us, you receive £25 in John Lewis vouchers. As a one-off promotion in March 2020, we will be offering £50 in John Lewis vouchers for any referrals that you make (quote code: MM50) so please get in touch HERE and refer your friends and family to us today.
Direct Debits
Would you like your fees frozen for this year and the costs spread over 12 months? If so, let us know and we can arrange for a direct debit payment for you.
Thank you for reading and do get in touch HERE if you have any questions, or if there is anything else we can do to help you.
