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Non-Residents’ Guide to UK Property Capital Gains Tax

The landscape of Capital Gains Tax (CGT) for non-residents in the UK, especially regarding property, has undergone significant changes in recent years. Understanding these changes is crucial for non-residents who have disposed of or plan to dispose of property in the UK. This guide aims to simplify the complexities of CGT for non-residents, providing a clear overview of what’s required.

Tax if you live abroad and sell your UK home

If you live abroad and sell your UK home, you may need to pay tax on profits since April 2015. It’s important to inform HMRC about the sale within 60 days, even if you don’t owe tax. Tax relief is often available, especially if you’ve spent significant time in the home. However, this relief can be limited if you’ve rented out part of your home, used it for business, or if the property is large. The last nine months of ownership usually qualify for full tax relief, which is longer for those with disabilities or in care.

Key Changes 

  • Extension of CGT for Non-Residents: Since 6 April 2019, non-resident CGT covers both direct and indirect disposals of all UK property or land. This includes residential, non-residential, and mixed-use properties​​.
  • Corporate Entities: From the same date, non-resident companies are subject to Corporation Tax on gains from UK property rather than CGT. This applies to collective investment vehicles and life assurance companies​​.
  • Reporting Requirements: Since 6 April 2020, non-residents must report and pay CGT for disposals of UK property or land, including residential, non-residential, and mixed-use properties​​.

Calculating the Gain or Loss

There are three primary ways to calculate the gain or loss: using the market value as of the 5th April 2015, a time apportionment method, or calculating over the whole ownership period​​​​​​. Getting an accurate property valuation is the owner’s responsibility and, whilst HMRC doesn’t prescribe a specific valuation method, professional valuation is always advisable​​.

  • Rebasing Method: For properties owned before the 6th of April 2015, the standard approach is to use the market value on 5 April 2015 and calculate the difference from the disposal date value​​. Similarly, for assets owned before the 6th of April 2019, the market value as of the 5th of April 2019 is used​​.
  • Time Apportionment: Alternatively, a simple straight-line time apportionment of the whole gain over the ownership period can be used, though this might be more beneficial in case of a loss​​.

Find out more about working out your taxable capital gain or loss with the HMRC Capital Gains Tax calculator here 

Key Reporting and Tax Payment Information for Property Disposals

  • Mandatory Reporting: Disposals must be reported to HMRC even if no tax is due or a loss was incurred​​​​.
  • Reporting Time Frame: The disposal of UK residential property must be reported and any due tax paid within 60 days of selling the property if the completion date is on or after 27 October 2021​​.
  • Online Reporting: Disposals are reported using an online CGT account, requiring specific details about the property and the disposal​​.
  • Self-Assessment Inclusion: If you complete a Self-Assessment tax return, you must include details of the disposal unless it’s your main home and qualifies for Private Residence Relief​​.

Find out more about when and how you need to report disposals and pay Capital Gains Tax if you’re not a resident of the UK here.

Tax Relief and Exemptions

  • Private Residence Relief: Non-residents may qualify for Private Residence Relief, particularly if they, their spouse, or civil partner spent at least 90 days in the UK home during the tax year​​​​.
  • Final Period Relief: Full tax relief is granted for the last nine months of ownership (36 months for disabled or long-term residential care individuals), with some exceptions​​​​.
  • Annual Exempt Amount (AEA): CGT is only payable on gains above the AEA​​. For 2023 to 2024, the AEA for individuals, personal representatives and trustees for disabled people is £6,000. For all other trustees, it’s £3,000. Find out more here.
  • International Treaties: Double Taxation Treaties can affect tax liability, with a requirement to file UK tax returns to claim treaty relief​​.

Compliant and Informed

Understanding and complying with the UK’s CGT requirements for non-residents can be challenging, but it’s essential to avoid penalties and optimise tax liabilities. 

At Norwich Accountancy, we know that everyone’s situation is different. Our specialists can help you navigate the world of UK property as a non-resident, especially for complex cases or significant property disposals. Don’t hesitate to get in touch for advice on staying informed and compliant, and to tackle the topic of tax stress-free.

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How Can Employers Get Tax Relief on Employee Pension Contributions

Employers play an important role in the financial security of their employees for later in life through pension contributions. Not only do these contributions help in building a robust retirement fund for employees, but they also offer employers valuable tax relief opportunities. Let’s look at how, as an employer, you can get tax relief on your employee pension contributions. 

Understanding the Two Main Methods

The UK tax system provides two primary methods for getting tax relief on employee pension contributions:

1. Net Pay Arrangement (NPA): In this approach, employers deduct pension contributions before applying PAYE (Pay As You Earn). This method is straightforward for employees, as they receive tax relief at their marginal rate of income tax without needing to take any extra steps. For employees, this translates into immediate tax relief, effectively lowering their taxable income.

2. Relief at Source (RAS): Differing from NPA, this method involves deducting contributions after PAYE. The pension scheme provider then claims back the basic rate tax relief from HMRC, adding this amount to the individual’s pension pot. However, for higher or additional rate taxpayers a further claim must be made to HMRC to receive the full tax relief due. This can be done through their tax code or a Self-Assessment tax return.

Which Method to Choose?

The choice of tax relief method is determined by the employer, not the individual employee. For all new registered pension schemes set up since April 2006, Relief at Source has been the default method. Employers, however, have the flexibility to choose the Net Pay Arrangement for new pension schemes, provided certain regulatory conditions are met. Once a scheme is registered, its form of tax relief remains fixed​​.

Salary Sacrifice Schemes

Many businesses choose the salary sacrifice arrangement linked to pension contributions. Under this arrangement, the employee agrees to a reduction in their salary in exchange for the employer making a higher pension contribution. This method effectively mirrors the Net Pay Arrangement in terms of tax relief. The good news is It can lead to savings on National Insurance contributions for both the employer and the employee.

However, it does require employers to be diligent in their reporting. If a salary sacrifice contribution is reported incorrectly as an employee contribution, it could lead to the pension scheme provider wrongly claiming tax relief from HMRC. The legal responsibility for any overclaimed relief falls on the pension scheme provider, emphasising accurate and careful reporting by employers​​.

Compliance and Reporting Obligations

To benefit from tax relief, employers must ensure their pension contributions satisfy several conditions. These include being paid within the accounting period and being wholly and exclusively for the business. What’s more, the amount of tax relief on substantial contributions may be distributed over several tax years, depending on the size of the contribution and the employer’s financial situation.

Employers are required to accurately report both their own and their employees’ pension contributions. Incorrect reporting can lead to compliance issues and potential penalties, highlighting how important good record-keeping and reporting practices are.

Maximising Tax Relief Benefits

For employers, understanding and properly managing pension contributions can lead to a sizeable tax relief. This relief can significantly reduce the overall cost of providing a pension scheme. Employers should consider the following strategies:

  • Choosing the Right Pension Scheme: Choose a pension scheme that aligns with your payroll system and is suitable for your employees’ tax situations.
  • Leveraging Salary Sacrifice Arrangements: Use salary sacrifice schemes to maximise tax and National Insurance savings.
  • Staying Informed: Keep up to date with changes in tax legislation and pension regulations to ensure you remain compliant and can make the most of the tax relief opportunities available. 

Final Thoughts

For employers, providing a pension scheme is a big part of employee benefits, offering a way for employees to plan for the future. By understanding the methods of Net Pay Arrangement and Relief at Source and sticking to reporting and compliance requirements, you can leverage tax relief opportunities and make sure you don’t pay more tax than you need to. 

At Norwich Accountancy, we’re here to help SMEs like yours make the most out of pension schemes and tax benefits. Tax rules can be tricky, especially with constant changes, but we’re here to guide you. Need help? We’re all about keeping things simple and helping you get every tax relief benefit you’re entitled to.

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Guidance on Rates and Thresholds for Employers from 2023 to 2024

Understanding tax codes, National Insurance contributions, and statutory payments is a crucial element in your role as an employer. It’s also vital to know the updated thresholds and rates set by HMRC to ensure accurate payroll management and tax compliance. To help, we’ve collated seven of the essential rates and thresholds for the 2023-2024 financial year.

1. Income Tax

The personal allowance, the amount of income you don’t have to pay tax on, remains a key figure.

  • Personal Allowance: £12,570
  • Basic rate (20%): For incomes over the personal allowance up to £37,700
  • Higher rate (40%): For incomes over £37,771 up to £125,140
  • Additional rate (45%): For incomes over £125,140

2. National Insurance Contributions (NICs)

You can only make National Insurance deductions on earnings above the lower earnings limit.

NICs thresholds:

  • Lower Earnings Limit: £123 per week.
  • Primary Threshold: £242 per week.
  • Secondary Threshold (ST): £175 per week.
  • Upper Earnings Limit (UEL): £967 per week.

Find the employee contribution rates here

Employer NIC 

You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill. 

  • Class 1: For employees earning above the Secondary Threshold, the rate remains at 13.8%.

3. Statutory Payments

Statutory Sick Pay (SSP):

The same SSP rate applies to all employees. However, the amount you pay depends on the number of ‘qualifying days’ they work each week.  Calculate your employee’s statutory sick pay here.

Statutory Maternity Pay (SMP), Paternity, Adoption, and Shared Parental Pay:

  • First 6 weeks: 90% of the employee’s average weekly earnings.
  • Remaining weeks: £172.48 or 90% of the employee’s average weekly earnings, whichever is lower.

4. Student Loan Deductions

If your employees’ earnings are above the earnings threshold, you must record their student loan and postgraduate loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay. There are several plans for student loan repayments:

  • Student loan plan threshold 1: £22,015 annually, threshold 2: £27,295 annually or threshold 4: £27,660 annually. Deduction rate: 9% on earnings above the threshold.
  • Postgraduate loan plan threshold: £21,000 annually. Deduction rate: 6% on earnings above the threshold.

5. Pension Contributions

Automatic enrolment obliges employers to enrol all workers into a qualifying workplace pension, provided that they ordinarily work in Great Britain and satisfy the age and earnings criteria.

Auto-enrolment thresholds:

  • Qualifying earnings band:
    • Lower level: £6,240 annually.
    • Upper level: £50,270 annually.

Minimum contribution rates:

  • Total minimum: 8% of qualifying earnings.
    • Employer’s minimum contribution: 3%.
    • Employee’s contribution: 5%.

6. Apprenticeship Levy

Employers with an annual pay bill of over £3 million are liable to pay.

  • Rate: 0.5% of the total pay bill.
  • Allowance: £15,000 annual allowance to offset against the levy payment.

7. Minimum Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. 

From 1 April 2023, the minimum wages are:

  • Aged 23 and above (national living wage rate: £10.42
  • Aged 21 to 22: £10.18
  • Aged 18 to 20: £7.49
  • Aged under 18 (but above compulsory school leaving age) £5.28
  • Apprentices aged 19 and over but in the first year of their apprenticeship: £5.28

How Can I Find Out More?  

The government website should have the most up-to-date rates and thresholds. 

Find out detailed information on all the above and more here.

Understanding the details needn’t be daunting. 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 October 2023 and subject to change

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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 is the personal tax allowance for 2023/24

As we are now well into the 2023/24 tax year, some of the biggest questions on many people’s minds are around personal tax allowance (PTA) – how much is it, and how does it impact me as a UK taxpayer? Let’s delve deep into understanding the PTA for 2023/24.

Personal Tax Allowance: An Overview

The personal tax allowance is a threshold set by the UK government under which an individual doesn’t have to pay any income tax. It’s a specific portion of your income that you’re allowed to earn tax-free each year. Any amount earned over this allowance is subject to taxation at the stipulated rates.

Although you may not be required to pay tax under the personal tax allowance, keep in mind that you may still be required to submit a tax return. 

Personal Tax Allowance for 2023/24

For the tax year 2023/24, the personal tax allowance is £12,570. 

This essentially means that if your annual income is up to £12,570, you won’t have to pay any income tax. However, for income exceeding this threshold, the excess amount is taxable. Depending on the tax band you fall into, you’ll be charged at different rates.

Tax Bands for 2023/24:

  1. Basic rate: If your income is over the PTA but under £50,270, the excess amount is charged at 20%.
  2. Higher rate: If your income is between £50,271 and £125,140, the excess over £50,271 is taxed at 40%.
  3. Additional rate: If your income exceeds £125,140, anything over this amount is taxed at 45%.

Remember, these rates apply to your income over the PTA, not your total income. 

Income over £100,000

One point to keep in mind is the income limit of £100,000. If your adjusted net income exceeds this amount your PTA will be reduced. For every £2 of income over £100,000, your allowance is reduced by £1. Therefore, the allowance may be nullified entirely if your income is considerably above this threshold. This means your allowance is zero if your income is £125,140 or above. 

Special Circumstances

There are several circumstances where your Personal Allowance may be higher.

  1. If you claim Marriage Allowance you can transfer £1,260 of your personal allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year. Find out more.
  2.  Blind Person’s Allowance is an amount added to your yearly personal allowance. For 2023 to 2024, it’s an additional £2,870. Find out more

Tax Bands Frozen until 2028

The PTA historically was increased annually to account for inflation and ensure that most low-income individuals remain tax-free. However, the personal allowance has remained the same for three years in a row. 

In 2021, it was announced the allowance would be frozen at £12,570 from the 2021/22 tax year, through to April 2028. Also, the additional rate threshold was lowered and again frozen from £150,000 to £125,140 from April 2023. 

These measures mean that, as wages rise, people will pay tax on a larger proportion of their earnings, and more people will move into higher tax brackets, potentially raising £25.5bn more a year in tax by 2027-28.

Know your limits

The personal tax allowance is a cornerstone of UK tax policies, ensuring that low to middle-income individuals are not unduly burdened by taxes. It’s essential to be aware of the thresholds and understand their implications on your tax liabilities, especially with tax bands now being frozen.

As always, while this blog post offers a general overview of the personal tax allowance for 2023/24, individual circumstances can vary. To get a tailored understanding of how PTA impacts your finances, don’t hesitate to get in touch. Remember, efficient tax planning is key to maximising your hard-earned money. Stay informed, plan ahead, and ensure you make the most of any allowances and reliefs available.

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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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An Employers Guide to Statutory Maternity Pay

As employers, understanding the complexities of Statutory Maternity Pay (SMP) is crucial not just for compliance, but also for supporting the well-being of your employees. In the UK, maternity rights have long been at the forefront, and the recent introduction of the Protection from Redundancy (Pregnancy and Family Leave) Act 2023 has further highlighted why it’s so important. This guide aims to help you navigate the basics of SMP and provide insight into the new 2023 Act.

What is Statutory Maternity Pay (SMP)?

SMP is a weekly payment that eligible pregnant employees can claim when they take time off to have a baby. It’s a legal requirement for employers to provide this to qualified employees.

SMP is divided into two parts: ordinary maternity leave, followed by additional maternity leave. Each lasts 26 weeks, meaning eligible employees can take up to 52 weeks of maternity leave. By law, employees must take at least two weeks after the birth (or four weeks if they’re a factory worker)

Who’s eligible for SMP?

While all employees with a contract are entitled to Statutory Maternity Leave, to be eligible for SMP, an employee must:

  • be on your payroll in the ‘qualifying week’ – the 15th week before the expected week of childbirth
  • give you the correct notice
  • provide proof they’re pregnant
  • have been continuously employed by you for at least 26 weeks up to any day in the qualifying week
  • earn at least £123 a week (gross) in an 8-week ‘relevant period’

Some employment types,  like agency workers, directors and educational workers, have different rules for entitlement. Find out more here.

How much is SMP?

SMP is paid for up to 39 weeks:

  • For the first six weeks: 90% of the employee’s average weekly earnings (AWE) before tax.
  • For the next 33 weeks: £172.48* or 90% of their AWE (whichever is lower).

How do I calculate SMP?

Calculating SMP can be tricky, especially if the employee’s earnings are not consistent. The key is to calculate the Average Weekly Earnings. This generally involves working out the gross earnings over a specific 8-week period leading up to the 15th week before the baby is due.

If in doubt, use the Gov.UK’s maternity, adoption and paternity calculator for employers. Find the calculator here.

How and when to pay SMP?

SMP should be paid in the same way and at the same time as you would pay salaries, i.e., monthly or weekly. It’s subject to tax and National Insurance in the same way as wages.

Can I reclaim SMP?

Yes, you can usually reclaim 92% of SMP payments. If you qualify for Small Employers’ Relief you can reclaim 103%. Your business qualifies for this relief if the total SMP you paid in the tax year is less than £45,000.

The Protection from Redundancy (Pregnancy and Family Leave) Act 2023

The introduction of the 2023 Act has made waves in the realm of employment rights. Here’s what you need to know:

Purpose of the Act

The Act primarily aims to bolster protections for pregnant employees and those on family-related leave (like maternity or paternity leave) from redundancy. It stems from a recognition that these employees often face vulnerabilities in the workplace and aims to create a safer, more supportive environment.

Key Provisions

Though we’re still waiting for the regulations to bring the full proposals into effect, the Act’s core principle is clear: employers cannot make employees redundant during their pregnancy, maternity leave, or during a six-month protective period after the end of their maternity leave, unless in exceptional circumstances.

Implications for Employers

  1. Review Redundancy Protocols: Ensure your redundancy procedures comply with the new law. Redundancies involving pregnant or new mothers should be treated with extreme caution and sound justification.
  2. Training: Make sure your HR and management teams are fully briefed on the new legislation to prevent inadvertent breaches.
  3. Document Decisions: Always document decision-making processes, especially when it concerns redundancies. In any disputes, having a clear paper trail will be invaluable.
  4. Open Communication: Keep lines of communication open with your employees. Clear understanding and transparency can prevent misunderstandings and foster trust.

Informed and in the know

Navigating the world of Statutory Maternity Pay and the new 2023 Act might seem daunting. But with a clear understanding and proactive approach, it’s entirely manageable. If you’re unsure how the maternity law changes will affect you or your business, or if you’ve any further questions, it’s a good idea to speak to an employment law specialist. As always, promoting a supportive and understanding workplace culture will go a long way in ensuring the well-being of your employees and the smooth operation of your business.

Stay tuned for more updates on the regulations of the 2023 Act, and for any further assistance or accounting needs, don’t hesitate to get in touch.

*figures are subject to annual changes. For current figures, take a look here

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Guidance on Claiming Research and Development (R&D) Tax Reliefs

The UK Government, with its strong inclination towards fostering innovation, offers lucrative tax incentives to businesses that engage in research and development (R&D) projects in science and technology. For businesses not already capitalising on these reliefs, understanding them can unlock significant savings, improving cash flow and encouraging further investment in innovation.

In this guide, we’ll demystify the process and provide a broad overview of the R&D tax relief scheme, helping you determine if your business is eligible and understand the claiming process.

What are R&D Tax Reliefs?

At its core, R&D tax reliefs allow companies to reduce their Corporation Tax or claim cash credits based on their R&D expenses. The UK provides two main R&D reliefs:

  • SME R&D Relief: 

Suitable for small and medium-sized enterprises (SMEs) with <500 staff, <100 million euros turnover, or <86 million euros balance sheet. For year ends starting on or after the 1st of April 2023, businesses can deduct an extra 86% of their qualifying costs from their yearly profit, alongside the standard 100% deduction, totalling a 186% deduction. Loss-making firms can also get a tax credit of up to 10% of the loss. 

  • RDEC (Research and Development Expenditure Credit): 

For larger companies and SMEs that have been subcontracted R&D work by a large company. The credit rate is 13% for expenses from 1 April 2020-1 March 2023 and 20% from 1 April 2023 onwards.

Find more information on converting tax relief into payable tax credits here.

Are You Eligible?

The notion of R&D means more than just white-lab-coat activities. Anything from developing new processes, products, or services to modifying existing ones can qualify if they tackle scientific or technological uncertainties.

Your UK-based limited company can claim R&D tax reliefs if: 

  • It incurs R&D expenses linked to your trade or potential trade. 
  • The project aims for scientific or technological advancement.

The Project

To claim R&D tax relief, simply stating you’ve done a project isn’t enough. It must meet HMRC’s R&D definitions, and you’ll need to demonstrate how the project covers:

  1. Advances in the Field: Your project should aim for an overall sector advancement, not just something new for your business. If another company has developed something similar but it’s not public knowledge, it can still count as an ‘advance’.
  2. Scientific or Technological Uncertainty: Your project must tackle issues that aren’t easily solvable by experts in the field. Readily available or easy solutions don’t qualify.
  3. Efforts to Overcome Uncertainty: Detail your research, tests, and efforts to address challenges, highlighting both successes and setbacks and showing genuine efforts to resolve challenges.
  4. Why Experts Couldn’t Solve It: Showcase that even seasoned professionals found the issues complex. Reference others’ failed attempts and your team’s expertise.

Qualifying Costs

Not all expenses qualify for R&D tax reliefs. Here’s a quick run-through of what generally qualifies:

  • Direct Staff Costs: Salaries, wages, and some other related costs of employees involved in R&D activities.
  • Externally Provided Workers: Costs associated with hiring freelancers, staff providers, or external agencies for R&D.
  • Subcontracted R&D Expenditure: Only for SMEs, with restrictions if the work is subcontracted to connected parties.
  • Consumables: Materials and utilities consumed directly in the R&D process.
  • Software: Software used exclusively in R&D activities.

Capital expenditure, travel, rent, and rates typically don’t qualify, so it’s important to consider what does and doesn’t qualify as an eligible R&D expense.

Find out more about what you can and can’t claim here.

Making a Claim

Here’s a step-by-step guide to making an R&D tax relief claim:

  • Identify R&D Projects: Understand which of your projects sought to achieve an advance in science or technology and faced uncertainties that competent professionals couldn’t resolve easily.
  • Calculate Expenditure: Tally up all the qualifying costs associated with those projects during the tax year.
  • Documentation: Maintain a robust documentation process. From project reports to financial records, these documents can be invaluable if HMRC wishes to review your claim.
  • Submit Your Claim: R&D tax relief claims are made in your Corporation Tax Return or amended return. Make sure to complete the full R&D section, including detailed project narratives, and annex the required CT600L supplementary pages. 
  • Deadline: You have two years from the end of the accounting period in which the R&D expenditure occurred to make your claim.

Common Pitfalls and How to Avoid Them

  • Under-claiming: Many companies either overlook or are unaware of the full range of costs that can qualify. Regularly review potential R&D activities and check what’s claimable.
  • Poor Record-Keeping: A lack of evidence or poor documentation can jeopardise your claim. Implement a system to document all R&D activities, decisions, and expenditures.
  • Not Meeting the Definition: Remember, it’s not enough for a project to be innovative. It must seek scientific or technological advancement and tackle uncertainties. Ensure that your project documentation clearly articulates this.

Potential to Propel Innovation

R&D tax reliefs are not just for tech giants or pharmaceutical titans. They cater to businesses of all sizes across numerous sectors. With the potential to recover a substantial portion of your R&D expenditure, understanding and leveraging these reliefs can be transformative for your company and propel scientific and technological innovation.

Navigating the process can be tricky, but that’s where we come in. Our team is here to clear up the confusion and handle the nitty-gritty details for you. So, if you’re feeling even a little overwhelmed or have a question, please don’t hesitate to get in touch. We’re here to make the world of tax simpler for you and, as always, help you make the most of the reliefs available. 

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What is a SA302 form?

If you’ve ever sat down to sort out some tax matters or tried getting a loan, you might have heard about the SA302 form. If you’re feeling a little lost, read on for our simple guide to the what, why and when of the SA302 form. 

What is the SA302?

An SA302 form is a tax calculation produced by HMRC for those who file a Self-assessment tax return. It details your income for a particular tax year and the tax that you owe or are due. Think of this as a report card that shows your tax position and explains how it was calculated. If you’ve used an accountant to complete your return, you’ll get an SA302 (also known as a Tax Calculation) on the back of the return.

Why Would I Need an SA302?

There are a few primary reasons why someone might need an SA302:

  1. Proof of Income: If you’re self-employed or have several sources of income, proving your income can be slightly more complicated than just presenting a payslip. Many lenders or financial institutions will request an SA302 as evidence of earnings.
  2. Mortgage Applications: Mortgage lenders often ask for the SA302 form as it provides a detailed breakdown of income over the tax year. It’s not uncommon for lenders to ask for SA302 forms spanning several years to gauge consistency in earnings. It gives them an idea of how much you earn, helping them decide how much they can lend you.
  3. Renting a Property: Some landlords or letting agents might request an SA302 to ensure potential tenants have a stable income.
  4. Personal Records: It’s always good practice to keep a record of your earnings and taxes paid. The SA302 is a comprehensive document that can be part of your financial records.

What’s on the SA302 Form?

The SA302 form contains:

  • Your total income for the tax year.
  • Breakdown of sources of income (e.g. from employment, property rental, dividends).
  • Total tax owed or refunded.
  • Personal Allowance and other tax adjustments.

It’s worth noting that the SA302 reflects what has been reported to HMRC. So, ensure all your income sources are declared accurately on your Self-assessment tax return.

But There’s a Catch

Here’s where things can get tricky. A tax return can be created without sending it to the tax office (HMRC). So, it’s possible to bump up the profit to make it look like you earn more than you actually do. The idea is to make lenders think you’re a safe bet.

But there’s a system in place to catch this.

Enter: The Tax Year Overview

To make sure everything’s above board, lenders also ask for another document called the Tax Year Overview. This can be obtained online by your accountant or by you if you have an HMRC account.

What’s it for? It shows your tax position with HMRC. Lenders will compare the numbers on this overview with those on the SA302. If they match up, it means the tax return was sent off with the numbers shown on the SA302, and the tax office is okay with it. The lender can then move forward.

What If Things Don’t Add Up?

If the numbers on the SA302 and the Tax Year Overview don’t match, it could cause problems. There might be different reasons for this mismatch, and lenders might stop everything until it’s sorted out. They just want to be sure they have the right information.

How to Get Your SA302 Tax Calculation

You can get evidence of your earnings (your SA302) once you’ve submitted your Self-Assessment tax return. You can also get a tax year overview for any year. To access both, log in to your HMRC online account, go to ‘Self-Assessment’, then ‘More Self-Assessment details’. If you or your accountant use commercial software to do your return, you’ll need to use that software to print your tax calculation. It might be called something different in the software – for example, ‘tax computation’.

If you’ve used an accountant to handle your tax affairs, they can obtain and provide you with the SA302 form.

In Short

The SA302 is basically a snapshot of your tax situation. When teamed up with the Tax Year Overview, it makes sure everything is transparent and above board.

If all this tax talk is making your head spin, don’t hesitate to get in touch for help. It’s always better to be in the know, especially when money is involved.

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