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What Triggers an HMRC Compliance Check

For the tax affairs of individuals and businesses in the UK, the HM Revenue and Customs (HMRC) is the governing authority that makes sure you’re toeing the line when it comes to tax laws. To maintain the integrity of the system, HMRC conducts compliance checks, also known as tax investigations. These can be daunting for anyone who finds themselves on the receiving end. Understanding what can trigger an HMRC compliance check is crucial for any taxpayer.

Common Triggers for HMRC Compliance Checks

  • Discrepancies in Tax Returns: The most common trigger is a discrepancy or anomaly in the tax return compared to previous years or similar businesses. This could include significant changes in income and expenses or making a large claim for a VAT refund when turnover is low. HMRC uses a sophisticated system to analyse returns, highlighting any that fall outside the norms for further inspection.
  • Late Filings and Payments: Consistently late filings or tax payments can raise red flags. This suggests to HMRC that there may be deeper issues with your financial management or a potential for incomplete or inaccurate reporting.
  • Informant Tips: Yes, HMRC receives tips, sometimes from disgruntled employees or competitors. If someone informs HMRC that a business or individual isn’t complying with tax laws, it may initiate a check.
  • Random Selection: Sometimes, there’s no specific reason; HMRC randomly selects tax profiles for investigation. It’s their way of keeping everyone on their toes and ensuring taxpayers maintain accurate records.
  • Sector-Specific Checks: HMRC periodically targets specific sectors where they believe tax avoidance or evasion is widespread. If your business operates within one of these sectors, your chances of a compliance check might increase during these campaigns.
  • Business Performance Inconsistencies: If your business shows markedly different performance metrics compared to others in your industry, HMRC might investigate to understand why. This doesn’t just apply to underperformance – unusually high success can also trigger a check.
  • International Transactions: With global transactions under increasing scrutiny, those who conduct a high volume of international business might find themselves subject to checks, especially if there are transactions from jurisdictions considered high-risk for tax evasion.

The Process of a Compliance Check

  • Initial Contact: A compliance check typically starts with HMRC notifying you, either through a letter or phone call. They will inform you of the check and what they need from you.
  • Gathering Information: HMRC will request specific documents, which could include personal or business bank statements, receipts, invoices, and accounting records. They may also want to look at your tax calculations and self-assessment returns in detail.
  • Meeting and Interviews: Sometimes, HMRC will ask to meet you or your accountant, or they may want to interview you to gather more information.
  • Outcome: Once HMRC has reviewed the necessary documentation and information, they will communicate their findings. If they find everything in order, they will close the investigation. If not, they may request additional payment of unpaid taxes, apply penalties, or, in severe cases, pursue criminal prosecution. In general, the more help you give, the lower the penalty will be.

How to Reduce the Risk of a Compliance Check

  • Accurate and Timely Filing: Ensure all tax returns are accurate and filed on time. Use professional accountancy services if you’re unsure about your ability to do this correctly.
  • Consistent Records: Maintain consistent and detailed financial records. This can make a compliance check much smoother and quicker.
  • Seek Professional Advice: If you’re in doubt about your tax affairs, it’s wise to seek advice from a qualified accountant or tax advisor. They can help you avoid pitfalls that might lead to a compliance check.
  • Disclose All Income: Declare all sources of income, including those from overseas. Full disclosure is always your safest bet.
  • Understand the Rules: Have a good understanding of the tax rules applicable to your business. If HMRC updates tax laws or guidance, make sure you’re following the new rules.
  • Report Changes: If there are legitimate reasons for changes in your income or business performance, report these proactively in your tax return.

Navigating Compliance Checks with Confidence

An HMRC compliance check can be a stressful experience, but understanding what can trigger an investigation is your first line of defence. Remember, most checks are initiated by anomalies or suspicions of incorrect tax reporting. By maintaining good records, submitting accurate and timely returns, and seeking professional guidance when necessary, you can minimise the chances of an HMRC compliance check disrupting your business or personal finances. If you need help keeping your records in order, don’t hesitate to reach out and speak to one of our tax return specialists. Our motto is ‘Tax Returns: Stress Deducted’ because we’re here to help keep your taxes on track, headache-free and hassle-free.

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How To Claim Corporation Tax Relief Costs On R&D If You’re An SME

As the UK continues to become a global hub for innovation, the government has implemented a range of financial incentives to encourage businesses to undertake research and development (R&D) activities. For example, the R&D tax credit system is designed specifically for Small and Medium-sized Enterprises (SMEs) and aims to lessen the financial burden of innovation costs. If you’re an SME working on projects in science and technology, it’s wise to take time to explore how to navigate this benefit to maximise your corporation tax relief to ensure you’re not paying more tax than you need to.

What is R&D Corporation Tax Relief for SMEs?

Before diving into the claiming process, it’s important to understand the tax relief itself. 

R&D Corporation Tax Relief allows SMEs to deduct an extra 86% of their qualifying R&D costs from their yearly profit. This is on top of the usual 100% deduction, making a total potential deduction of 186%.

For SMEs operating at a loss, there’s an option to claim a tax credit worth up to 10% of the surrenderable loss. In essence, it can provide a cash injection when the company needs it most.

Do You Qualify?

R&D tax relief is there to support companies working on innovative projects in science and technology. With this in mind, you can’t claim if the advance is in the arts, humanities or social sciences.

To claim R&D tax relief, you must be a UK-based SME with:

  • Fewer than 500 staff.
  • A turnover of under €100m or a balance sheet total under €86m.

What’s more, the R&D project should aim to achieve an advancement in science or technology, and you’ll need to show how a project had to or tried to overcome scientific or technological uncertainty.

Steps to Claim Corporation Tax Relief on R&D for SMEs

  1. Maintain Accurate Records: Ensure you have robust records detailing all R&D activities and associated costs. This will help calculate your R&D expenditure and provide evidence if HMRC ever asks to see it.
  1. Identify Qualifying R&D Activities: This is a nuanced process, and not all activities related to R&D might qualify. Generally, tasks directly contributing to seeking an advancement in science or technology, or supporting such activities, can be included.
  1. Define the Qualifying Expenses: These can include:
    • Staff salaries, wages, and NICs.
    • Certain subcontractor costs.
    • Materials and consumables used up in R&D processes.
    • Some types of software.
    • Data licence costs and cloud computing costs (for accounting periods beginning on or after 1 April 2023)
    • Utilities, like power, water and fuel used in R&D.

Remember, the goal here is to focus on the tax relief and not the expenses per se. Therefore, make sure you’re meticulous in identifying what counts towards the relief. Find out more about which costs qualify here.

  1. Calculate the Enhanced Expenditure

Once you’ve identified the qualifying activities and expenses, there are a few calculations to do before preparing and submitting your claim, namely:

  1. Reduce any relevant subcontractor or external staff provider payments to 65% of the original cost.
  2. Add all the costs together.
  3. Multiplying the figure by 86%
  4. Add this to the original R&D expenditure figure.
  1. Before Submit a Claim Notification

From the 1st of April 2023, you might need to submit a claim notification form to let HMRC know your claim is coming. This is usually if you’re claiming for the first time or your last claim was made more than three years ago. Find out what you need to provide here.

  1. Submit a Claim Notification

From the 8th of August 2023, you must submit an additional information form to support your claim before you submit your company’s Corporation Tax Return. Failing to do so will result in your claim being removed. Find out more here.

  1. Prepare and Submit Your CT600: Your claim for R&D tax relief is made in your Company Tax Return by:
  • completing the single iXBRL computations file
  • putting an ‘X’ in box 656 to say you’ve submitted the claim notification form
  • putting an ‘X’ in box 657 to say you’ve submitted the additional information form
  • completing the supplementary form CT600L, if you’re claiming a payable tax credit or R&D expenditure credit
  1. Claim within Time Limits: Make your R&D tax relief claim within two years of the end of the accounting period the R&D expenditure was incurred. Also note that if your tax relief claim covers more than 12 months, you must submit a separate claim for each accounting period.

A Few Extra Considerations

When it comes to working out the financials for R&D costs and making a claim, there are a couple more things to consider.

External Investors: If your company has external investors, the staff, turnover, and balance sheets of any linked or partner enterprises may need to be included. Find out more here. 

R&D Tax Relief Advance Assurance: If you’re making your first claim for tax relief as an SME, you may be able to apply for advance assurance for your first three accounting periods. It’s a voluntary scheme to give assurance your claims will be processed without further enquiry from HMRC and is there to help businesses in their early phases of growth. Find out more here.

Final Thoughts

R&D Corporation Tax Relief offers a significant financial benefit to SMEs driving innovation in the UK. However, navigating the relief process can be intricate. By keeping comprehensive records, understanding the specifics of qualifying costs, and seeking expert advice when needed, your company can harness the full power of this incentive.

At Norwich Accountancy, we pride ourselves on guiding SMEs through the complexities of the tax landscape, helping you to capitalise on every available benefit. If you have questions or need assistance with your R&D tax relief claim, don’t hesitate to reach out. 

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What are the benefits of filing your company accounts early?

When it comes to business financial matters, there’s much to be said for getting ahead of the game. Although it’s probably not the most thrilling task on your business agenda, filing your company accounts early can provide huge advantages. 

Most UK businesses are required to prepare and file annual accounts at Companies House. But many leave this task until the last minute, rushing to meet their year-end deadline. However, an early filing strategy offers a range of benefits. Let’s explore some of them.

1. Reduced Stress

The financial year-end can be stressful, with businesses scrambling to get their finances in order and reconcile statements. By filing your accounts early, you eliminate the rush and the stress that goes with it. It ensures your business operates smoothly and efficiently, leaving no room for last-minute mistakes or oversights.

2. Better Planning and Decision Making

An early understanding of your financial position allows you to strategise for the year ahead. Knowing your tax liabilities or seeing areas of growth or potential concern can enable more informed decision-making. It allows you to allocate resources, invest wisely, or even consider business expansions with clarity and confidence.

3. Cash Flow Management

Tax obligations are often a source of worry for many companies. Finalising accounts early gives a clearer picture of any corporation tax due. This advanced knowledge can help with better cash flow management, ensuring you have sufficient funds to meet the tax bill when it’s due.

4. Mitigate Potential Issues

An early start means more time to identify and rectify any discrepancies or mistakes. If any issues need additional attention, such as discrepancies in financial statements or clarification from HMRC, you have ample time to address them without incurring penalties.

5. Enhanced Reputation

Timeliness is seen as a reflection of professionalism. Filing your accounts early can enhance your business’s reputation with stakeholders, including investors, banks, and customers. It signals that your company is well-organised, forward-thinking, and trustworthy.

6. Avoiding Penalties

Though this might seem obvious, it’s worth reiterating. Companies House imposes penalties for late filing. Missing your filing deadline could affect your credit score or access to finance. By ensuring your accounts are filed early, you avoid unnecessary fees and penalties. An early submission ensures you remain compliant and save money.

Why You Should Plan Early

At Norwich Accountancy, we always have our client’s best interests at heart. We recommend that our clients get prepared before the end of their financial year. Here’s why:

  • Personalised Attention

Coming in early allows us to provide a personalised, detailed service. It means we can spend quality time with each client, understanding their business nuances and offering tailored advice.

  • Strategic Tax Planning

We can assess potential tax reliefs, allowances, or even R&D tax credits you might be eligible for.

  • Addressing Concerns

If you have specific concerns or areas you’d like us to focus on, meeting early ensures we have ample time to delve deep. Whether that’s optimising expenses, considering new investments, or restructuring, we have the time to evaluate, suggest, and implement changes.

  • Peace of Mind

Finally, engaging with us early means one less thing on your to-do list as your financial year ends. You can focus on running your business, safe in the knowledge that your accounts are in capable hands.

It Pays to Stay Ahead

In business, as in life, it pays to have your proverbial ducks in a row. Filing your company accounts earlier than required isn’t just about compliance; it’s about harnessing the benefits that proactive financial management can bring. 

As qualified accountants and tax advisors, we’re here to guide, advise, and ensure your business financials are not just in order but optimised for growth and success. So, why wait? Let’s get a jumpstart on your accounts today.

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Our Guide to UK Corporation Tax

Navigating the world of UK business taxes can sometimes feel like wandering through a dense forest without a map. Whether you’re a business owner or just curious about how the tax works, you’ve landed at the right place. Let’s unravel the mysteries of UK Corporation Tax in this easy-to-follow guide.

What is Corporation Tax?

At its core, Corporation Tax is a bit like income tax but for companies. Every year, companies need to pay a portion of their profits to the government, and that’s what we call Corporation Tax.

Being a yearly tax on the profits generated by limited businesses and incorporated bodies it’s calculated based on the company’s accounting period, which is usually due for payment every 12 months, or 9 months in the year from 31st March depending on when your annual accounting period ends. 

Who pays Corporation Tax?

If you run a limited company in the UK – whether that’s a small business, a start-up, or a large enterprise, you’ll need to pay Corporation Tax on all your profits. This includes companies that are incorporated in the UK, as well as companies that are incorporated overseas, and have a permanent establishment in the UK.

You must pay Corporation Tax on profits from doing business as:

  • a limited company
  • any foreign company with a UK branch or office
  • a club, co-operative or other unincorporated association, for example, a community group or sports club

How much is it?

The rate you pay differs depending on the amount of profit you make.

  • If you made company profits of more than £250,000, you’ll pay the ‘main rate’ or Corporation tax, which is currently 25%.*
  • If your company made a profit between £50,000* and £250,000* you may be entitled to Marginal Relief which provides a gradual increase between the small and main rate. Find out if you are eligible here.
  • If you made a £50,000* or less profit, you’ll pay the ‘small profits rate’ which is 19%*

How is corporation tax calculated?

The formula is simple:

Corporation Tax = Taxable Profits x Corporation Tax Rate

The tricky part is figuring out what counts as taxable profits, which can include:

  • Trading profits
  • Investments
  • Selling assets (like business property or shares)

Remember, costs like salaries, business expenses, and certain allowances can reduce your taxable profits.

It’s calculated on the profits generated during a company’s accounting period after expenses, such as the cost of goods sold, salaries and rent, have been deducted. 

Deductions and Reliefs

If you’re worried about how much corporation tax you’ll have to pay, the good news is that there are a few reliefs and allowances you can use to claim against your profits like research and development allowances, relief for creative industries and capital allowances.

Find out all the allowances and reliefs here

How and when to pay?

You don’t get a bill for Corporation Tax. Instead, there are specific things you need to work out, pay and report.

To pay, you’ll need to:

  1. Register for Corporation Tax 
  2. Keep accounting records 
  3. Calculate your Corporation Tax (or hire an accountant to do it!)
  4. Pay HMRC – you can do this by Faster Payments, CHAPS or Bacs or over the phone. You’ll need to report if you have nothing to pay by your deadline. This is usually 9 months and 1 day after the end of your accounting period, which is typically the end of your financial year. 
  5. File your Company Tax Return by your deadline – usually 12 months after the end of your accounting period.

What are the penalties for not paying corporation tax?

On a more serious note, companies that don’t pay their corporation tax on time are liable to incur penalties applied by HM Revenue & Customs (HMRC). The penalties can be significant but may also lead to criminal prosecution. They also increase the longer you leave it to pay.

Current penalties are: 

  • 1 day: £100*
  • 3 months: £200*
  • 6 months: HM Revenue and Customs (HMRC) will estimate your Corporation Tax bill and add a penalty of 10%* the unpaid tax.
  • 12 months: Another 10%* of any unpaid tax.
  • If your tax return is late 3 times in a row, the £100 penalties are increased to £500* each.

If you have a reasonable excuse, you can appeal by writing to your company’s Corporation Tax office.

What if I make a mistake?

Mistakes happen. If you realise you’ve made an error on your tax return after it’s been submitted, you can amend it within 12 months. If you’re unsure, it’s always best to get advice from an accountant. To make changes you can:

  • Use commercial software
  • Send a paper return or write to your company’s Corporation Tax office.

Keeping Records

The UK law mandates that you keep records of your company’s income, costs, and other financial transactions for at least 6 years. This helps in case HMRC wants to review your tax calculation or if you need to revisit any data.

How can I find out more about corporation tax?

The government website has a lot of information about corporation tax, including the current rates of tax, how to calculate it on your profits and the penalties incurred for non-payment. 

Find out detailed information here.

Understanding Corporation Tax doesn’t need to be daunting. While there are intricacies to the process, a bit of knowledge and the help of a good accountant can make it all manageable. If you ever feel lost, remember: Your business is our business and we’re always here to lend a friendly ear and a helping hand. 

*All figures are correct at September 2023 and subject to change

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What is the Gross Payment Status (GPS) Compliance Test and How to Apply

The construction industry in the UK operates under a unique tax system known as the Construction Industry Scheme (CIS). If you’re a contractor or subcontractor in this industry, understanding the CIS, specifically the Gross Payment Status (GPS), can be crucial for your business finances. So, what is the Gross Payment Status Compliance Test, and how can you apply for it? Let’s dive in.

What is Gross Payment Status (GPS)?

Within the CIS, contractors usually deduct tax at source from payments made to subcontractors. This means that subcontractors receive payments after the tax has been deducted. However, businesses with a Gross Payment Status receive their payments in full, without any deductions. Instead, they are responsible for managing their tax and National Insurance contributions.

Benefits of GPS

  • Improved Cash Flow: As your payments are not subject to up-front deductions, you have better control over your funds.
  • Business Reputation: Achieving and maintaining GPS can elevate your reputation in the construction industry. It indicates financial stability and reliability in managing tax obligations.

Achieving GPS can be beneficial, but to be eligible a subcontractor must pass the GPS Compliance Test.

GPS Compliance Test

The GPS Compliance Test makes sure subcontractors can be trusted to handle their own taxes responsibly. The main criteria include:

  1. Business Test: The construction work must be undertaken in the UK and run through a bank account.
  2. Turnover Test: There’s a threshold for the turnover from construction work. HMRC evaluates your past year’s turnover, excluding VAT and material costs. The required turnover is:
  • £30,000 for sole traders.
  • £30,000 per partner in a partnership or a minimum of £100,000 for the entire partnership.
  • £30,000 per company director or a minimum of £100,000 for the entire company.
  • For companies controlled by 5 or fewer people, the annual turnover must be £30,000 for each individual.
  1. Compliance Test: You must show a good record of tax returns and payments for the previous 12 months. No late submissions, unpaid tax or overdue amounts!

If you pass all three parts of the test, you can apply for GPS. But remember, you have to continue meeting these criteria because HMRC reviews the status annually.

How to Apply for Gross Payment Status

  1. CIS Registration: Before applying for GPS make sure you’re registered under the CIS. Both contractors and subcontractors need to be registered. You can apply when you register for the CIS or at a later date.
  1. Application:

If applying at the same time as registering for CIS:

  1. Sign in to Government Gateway. 
  2. From ‘Your tax account’, go to ‘Other services’. 
  3. Choose ‘Construction Industry Scheme – Subcontractors.

If applying after you register for CIS:

  1. Call the CIS helpline.
  2. Fill in a form.
  3. Supporting Documentation: You may be asked to provide certain documents such as business accounts, VAT returns, and evidence of operating your business through a bank account.
  4. Compliance Checks: HMRC will conduct checks to ensure you meet all the criteria for the GPS Compliance Test.
  5. Approval: If your application is successful, you’ll be granted GPS, and contractors won’t make deductions from your payments. You will, however, be responsible for paying your tax and National Insurance at the end of the tax year.
  6. Regular Review: HMRC reviews your status annually. Stay compliant with all your tax obligations to maintain your GPS.

        Helping You Navigate The GPS

        Navigating the Gross Payment Status (GPS) might sound complex, but the perks for subcontractors are huge. Just remember, staying on top of your taxes is the key. The HMRC sees GPS as a trust badge, given only to those who’ve earned it.

        Thinking of diving into GPS? Make sure your finances are tidy, and keep an eye on any CIS or GPS updates. With the right approach, GPS can be a game-changer for your business.

        Find current HMRC CIS info here

        Find current HMRC GPS info here

        Need a hand? As your go-to tax partners, we’ll simplify the CIS, manage your payments, and make sure your tax returns are on point. Our goal? Letting you focus on building great things, while we handle the numbers.

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        What do the proposed Companies House reforms mean for small businesses

        The UK government has proposed a number of reforms to Companies House, the official registrar of companies in the UK. These reforms should improve the transparency and accountability of companies, making it easier for law enforcement agencies to investigate financial crime. Whilst it might mean some extra admin, it should paint a more transparent picture of a business, helping people make more informed decisions about who they do business with.

        There are 3 main proposed changes:

        • Enhanced Identity Verification helps to deter criminals from using companies for illegal purposes.
        • Compulsory filing of profit and loss accounts for all small companies, making it easier for investors, customers and suppliers to assess a company’s financial health.
        • Digital filing only makes it easier for Companies House to process filings and simultaneously help reduce fraud.

        Let’s look at the changes in more detail and what they can mean for small businesses.

        When and why are the changes happening?

        Since February 2022, the UK Government has made clear its intention to expand the role and powers of Companies House to address the increasing misuse of UK corporate identities and improve the accuracy of filed data. The changes form part of the Economic Crime and Corporate Transparency (ECCT) Bill. As the ECCT is still making its way through Parliament, the changes are still at the proposal stage, so the exact timings aren’t yet known. 

        The vision of the changes for Companies House is to create a single, cost-effective, sustainable way of filing accounts, which will be secure, transparent and traceable. 

        Enhanced Identity Verification

        One of the most significant proposed changes is introducing an identity verification process for all company directors, People with Significant Control (PSC), and those filing on behalf of a company. This move is designed to reduce the risk of fraud and ensure accurate information is provided to Companies House.

        Implications for Small Businesses: While identity verification may seem like an added layer of bureaucracy, the intention is to protect businesses. By ensuring that only legitimate individuals can register or make changes to a company’s details, small businesses are safeguarded from potentially fraudulent activities. However, it also means that small businesses need to make sure their documentation is always up-to-date and accurate.

        Compulsory filing of profit and loss accounts for all small companies

        Currently, small companies don’t have to file profit and loss accounts with Companies House. This change would mean that all small companies will be required to file this information annually, making it easier for investors, customers and suppliers to assess a company’s financial health.

        Implications for Small Businesses: This change has pros and cons for small business owners. For some, it may mean more paperwork and potential costs. They might have to spend more on accounting help, and competitors could see how they’re doing financially. While it may make things clearer and fairer for everyone, it also means less privacy for the businesses’ earnings. 

        Digital filing

        Currently, companies can file their accounts with Companies House in paper form using web-based systems or software. Under the proposed reforms, all filings would need to be made digitally. That will make it easier for Companies House to process filings and help to reduce fraud. Companies House has already begun work to move to software-only accounts filing, which will see the removal of all other filing routes for accounts.

        Implications for Small Businesses: The move to digital filing could save small businesses time and money. However, it’s important to ensure they have access to the technology and support they need to comply with the new requirements.

        The overall impact on small businesses

        These reforms are likely to significantly impact small businesses in the UK, particularly having to file profit and loss accounts which could add more administrative burden. But, on the plus side, the increased transparency may help attract investors and customers, making it easier for small businesses to raise finance.

        Overall, we believe the proposed Companies House reforms will have a positive impact on small businesses in the UK. They will improve transparency, accountability and security, making it easier for small businesses to raise finance and generate growth.

        What can small businesses do to prepare for the reforms?

        Nothing will change until after the ECCT Bill receives royal assent, so you don’t need to do anything differently yet. But preparation is key, so, here are our tips on how small businesses can get ready for the reforms:

        • Keep good records. Keep good records of your financial transactions, making it easier to prepare the required accounts for filing. It’ll also demonstrate compliance with the new regulations.
        • Get familiar with the new requirements. Get to know the new requirements by reading the guidance published by Companies House.
        • Seek professional advice. If you need help complying with the new requirements, seek professional advice from an accountant or solicitor.

        Following these tips will help you stay on track as the changes come into play. From keeping your records to advice on the changes and what they mean for you and your business, we’re always here to help.

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        VAT Turns 50: Our Review of the Highs and Lows of This Tax in its 50th Year

        As the UK’s VAT turns 50, as accountants, we review the highs and lows of this tax in its 50th year.

        Value Added Tax (VAT) was introduced in the UK on 1 April 1973 to replace the old purchase tax. It is a consumption tax charged on the sale of goods and services. Over the last half a century, we’ve seen the welcome highs and horrible lows of VAT. So, here are our observations.

        VAT highs

        You might think that there haven’t been many highs for VAT over the last 50 years but:

        • VAT’s been a very successful tax for the UK government. It’s relatively easy to collect and generates a significant amount of revenue.
        • It’s helped simplify the UK’s tax system. By replacing several other taxes, it’s easier for businesses to calculate and pay their taxes.
        • VAT helped promote cross-border trade. Applying the same tax rate to goods and services sold in different countries makes it easier for businesses to trade internationally.

        VAT lows

        As you’d expects there is a list of lows when it comes to the impact of VAT, such as:

        • VAT can be a complex tax for businesses to comply with. As we’re sure you already know, there are several different rules and regulations that you need to know about and it can be tricky to keep up with changes to the law.
        • It’s a pain for consumers’ pockets. Added VAT on goods and services makes them more expensive, which means they may be more reluctant to spend.

        Looking to the future

        As we look to the future, VAT will continue to be an important source of revenue for the UK government. However, it’s also likely that the tax will continue to evolve with changes to VAT rates or new rules and regulations.

        The UK may adopt a different approach to VAT in the future, for example, moving to a single rate of VAT or adopting a destination-based taxation system.

        Only time will tell what the future holds for VAT. However, one thing is for sure, VAT will continue to be a major factor in the UK tax system for many years to come. As accountants, we closely monitor VAT developments and are here to help you understand, and comply with the latest VAT rules and regulations. Get in touch if you’ve got any VAT-related questions.

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        Which Assets Do You Not Pay CGT On?

        We not only make sure you pay the right taxes by the right deadlines but help you pay as little tax as possible.  Capital Gains Tax (CGT) is a tax on the profit you make when you sell an asset that has increased in value, but some assets that are exempt from CGT in the UK, including:

        • Your main home. You don’t pay CGT on any gains you make when you sell your main home if you have one home and you’ve lived in it as your main home for all the time you’ve owned it.
        • Personal possessions. You don’t pay CGT on gains you make when you sell personal possessions, like furniture or jewellery, up to your annual exemption of £6000. This means that you don’t pay CGT on gains up to this amount, but you do if you’re lucky enough to be the owner of a Banksy and decide to sell for example.
        • Assets held in an ISA or a SIPP. You don’t pay CGT on gains you make when you sell assets held in an ISA or a SIPP. ISAs and SIPPs are tax-efficient savings and investment accounts.
        • Certain business assets. If you’re self-employed or run a business, you may be able to claim relief from CGT on gains you make when you sell certain business assets, including goodwill and intellectual property.

        If you’re unsure whether an asset you’re selling is exempt from CGT,  we can help you work out whether you have to pay CGT and what you’ll have to pay. 

        Extra tips about CGT and assets

        Check out these extra tips to help you keep on top of any potential CGT tax liabilities:

        • Keep good records. It’s important to keep good records of all of your assets, including the date you bought them, the amount paid and any improvements you’ve made to them. This helps you calculate the gains when you sell the asset and makes sure you don’t overpay CGT.
        • Report your gains. If you sell a residential home subject to CGT, you must report the gains to HMRC within 60 days.

        If you’re unsure about CGT, always seek professional help. We can help you calculate your gains, show you how to report them to HMRC and make sure you’re not paying more than you need to.

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        Top Priorities When Preparing for Tax Due Diligence

        Tax can seem like one of the most complicated bits of your business and tax due diligence is no different. It’s the process of gathering information about your company’s tax affairs to make sure it’s compliant with current tax laws. It’s also a critical part of any business’s risk management assessment and helps spot and reduce any potential tax risks.

        Preparation is always the key when preparing for a company’s tax due diligence. There are some steps you can take to make it more straightforward, such as:  

        • Understand the tax laws. The first step is to understand the relevant company tax laws in the UK. This includes the different types of taxes that businesses are subject to and the rules and regulations governing these taxes.
        • Gather all relevant documentation. Make sure you gather all documentation relating to your company’s tax affairs, including tax returns, invoices, contracts and bank statements.
        • Identify any potential risks. Once you have all the relevant documentation together, take the time to identify any potential risks in your tax affairs, for example, errors on tax returns, unreported income or improper deductions.
        • Take steps to mitigate any risks. Once you’ve spotted any potential risks, do something to stop them. This may involve amending tax returns, paying back unreported income or correcting improper deductions.
        • Have a plan in place. It’s important to have a plan in place in case there’s an audit. Your plan should include who’s responsible for responding to the audit, what documentation you’ll need to provide and how you’ll address any findings.

        By following these steps, you can prepare your business for the tax due diligence process in the UK and make sure you’re compliant with the tax laws. If you’re uncomfortable with the tax due diligence process, always seek professional help. We’re here to make the complicated clearer and the overwhelming accessible when it comes to tax, so get in touch with our team today. 

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        How to Chase Monies Owed Using Statements of Accounts?

        As a business owner, one of the most important things you can do is keep track of your finances. This includes tracking your income and expenses, so knowing exactly what’s coming in and what’s going out, as well as any outstanding debts. One way to do this is by using statements of accounts.

        What is a statement of accounts?

        A statement of accounts is a document that summarises your financial activity over a period of time. It typically includes information like your income, expenses, assets and liabilities. They can be used to track your cash flow, identify areas where you could save money and make sure you’re paying your bills on time.

        If you’re owed money by a customer, you can use a statement of accounts to track the outstanding debt. This will help keep track of the amount of money owed, the date the payment is due and any late fees that may be incurred.

        How to use a statement of accounts

        There are a few different ways to chase monies owed using a statement of accounts. One way is to send the customer a copy of the statement of accounts and a reminder that payment is due. You could send the customer a letter or email requesting payment. If the customer still doesn’t pay, you may need to take further action, like sending a letter before action to the customer or taking them to court.

        Here are our tips for chasing monies owed using a statement of accounts:

        • Be polite and professional at all times.
        • Be clear and concise in your communications.
        • Set a deadline for payment.
        • Follow up if the payment is not received by the deadline.
        • Be prepared to take further action if necessary.

        Extra tips for using statements of accounts

        Here are a few extra top tips to help you in using statements of accounts to chase debts:

        • Keep good records. Make sure you keep copies of all correspondence with the customer and any other documentation related to the debt. You’ll need this information if you need to take legal action.
        • Be patient. It may take time to collect the debt. Don’t give up if you don’t get paid straight away, and remember it’s better to receive little and often than nothing at all.

        Chasing monies owed can be challenging and is rarely any business owner’s favourite part of running a business, but it’s important to take action if you’re not paid. By using statements of accounts and following our tips above, you’ll increase your chances of successfully collecting the debt.

        If you’re struggling to collect a debt owed, consider using a debt collection agency. Always seek the advice of a professional accountant if you’re unsure how to go about collecting a debt. Our accountants are here to help with a range of tasks – the good, the bad and the ugly.

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