01908 219100

Ad Valorem

Treating your business like ours

Sophie Wright

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George Bruce – Senior Business Development Manager

Throughout the past 12 weeks businesses have had to adapt their way of working to become more flexible and agile in order to operate in the current climate. Businesses have had to rely on remote and flexible working to keep active and open during this time of economic uncertainty and reduced operation. 

It’s important during these unprecedented times for businesses to know and understand their financial position, in order to help manage cashflow and have the flexibility to make quick business decisions based on real-time information. Cloud accounting is one of the best ways to stay on top of your numbers!

Cloud accounting simply means keeping your business finances online. Our preferred cloud accounting system is Xero. Xero makes it easy for business owners to keep on top of their book-keeping, providing the ability to see up to date financial figures anywhere in the world using the app or via your online login.

Its features allow you to feed your bank transactions into the system and upload purchase invoices by taking a photo, reducing the amount of time inputting information and automatically keeping up to date. Xero has over 800 connected apps, which can be linked to the software to streamlining tasks and create further efficiencies such as entering purchase invoices, managing stock or extracting sales data from your website. 

What are the benefits of using Xero?

Xero offers multiple benefits but our top three are:

  1. Saving time – automation of bank feeds & reduced manual entry! 
  2. Clear visibility – access to your “real-time” financial position anywhere in the world via the app. 
  3. Getting paid faster – online invoice payment options.

Things to consider when looking to move to Xero.

If you are looking to move your accounts onto Xero there are a few things to consider to make the process easier. The easiest time to change over is at the end of your financial year, so that your previous tax year has been closed off and you can start fresh when using Xero.

There are a couple of options if you find yourself wanting to bring transactional data across from your current accounting system. It is also possible to transfer systems during your financial year and we have assisted many clients with a data transfer. As we are a Xero Platinum Partner, with all of our accountants being Xero certified, we are confident in completing this task. 

Thinking of using Xero?

Don’t take our word for it! We have seen cloud accounting change many of our client’s businesses…

‘Having moved to Ad Valorem just over 6 months ago we saw improvements immediately in our accounting processes, with everything being reviewed and then streamlined. With the use of software such as Expandly and Receipt Bank this has helped save us substantial man hours. The prompt advice on all queries has also allowed us to assess the impact of business decisions quickly. Ad Valorem are the most forward-thinking Accounting Practice we have dealt with!’ Tony Jassal – TRME Sports Ltd

Get in touch to find out how we can change your business.

(E) enquiries@advaloremgroup.uk  (T) 01908 219100

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Alex Black ACCA – Head of R&D

It has previously been requested and highlighted by firms and its members providing R&D Tax advice that there are a number of areas where they would appreciate clarity on the application of Professional Conduct in Relation to Taxation (PCRT) to their work. Members having any involvement with R&D Tax Credits have a responsibility to comply with the Fundamental Principles and the Standards for Tax Planning which are outlined in the PCRT and the Rulebook.

Tax advisors have a responsibility both to their clients, the professions reputation and the wider public interest. The PCRT helps to outline the standards and principles which can help to achieve this.

Many Accountants are already aware of the PCRT guidance. Many businesses however, are not as familiar with it and its fundamental principles. The 5 main principles that members of the professional body must adhere to are: integrity, objectivity, professional competence and professional behaviour.

Businesses and individuals rely on the advice and guidance from professionals and the above principles are in place to provide them against receiving bad advice. To receive advice there are 3 main areas to which the topical guidance covers:

Regulatory Expectations:

The guidance outlines those who are covered and the services. Any member of the PCRT bodies (ATT, AAT, ICAEW, ICAS, ACCA, STEP, CIOT) must follow and adhere to the PCRT guidance. This rule also applies to any advice which relates to a company’s R&D tax relief claim and must be following the PCRT guidance. Therefore any R&D tax advisor should be meeting their regulatory obligations such as GDPR compliance and anti-money laundering (AML).

Competence:

The PCRT includes that all advisors should attempt to do their absolute best to provide the best service to their clients and to get their clients claims right. Any member of the above governing bodies must be competent to provide such a specialist service (such as R&D) or they are not allowed to offer such service. The guidance highlights that R&D tax is a specialist service area and requires an in depth level of training and CPD.

Behaviour:

The principles of integrity, objectivity and professional behaviour govern the relationship between an adviser and their client. The guidance clearly outlines how advisers should behave and operate when dealing with their clients and their personal information and to not misrepresent themselves through personal brand marketing. The over arching theme here being responsible with data and transparent as an adviser in your abilities, strengths and weaknesses.

Since being introduced in 2000, R&D tax credits and the need for R&D tax advice has increased significantly as businesses continue to understand the requirements and benefits. This has opened doors for advisers to broaden their portfolio of abilities but has highlighted the need for specific knowledge on the R&D Government scheme. When taking over claims from other provides who don’t specialise in R&D tax credits, we’ve seen on a number of occasions where claims haven’t included all qualifying expenditure or understood the HMRC rules.

The PCRT has been put in place to help prevent advisers who are trying to reap the benefits themselves without actually producing a ‘good’ claim for their clients. Many advisers don’t understand the technical narrative and understanding needed to produce a successful claim and in the process of attempting to do so could prevent their clients from receiving their full funding amount.

Overall, the new PCRT guidance has helped to highlight to both advisors and clients how niche R&D actually is and how it requires a specialist team almost purposefully built who specialise solely in R&D to fully complete a success claim to its full potential.

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We have prepared the below to highlight key areas in tax year 2020/21. If you have any questions regarding the information below please contact us at enquiries@advaloremgroup.uk.

TAX CODES
The personal allowance for 2020/21 has remained the same being £12,500 with a tax code of 1250L.

NEW EMPLOYEES
HMRC require either form P45 or Starter Checklist when processing a new employee as this determines the tax code to operate.  Therefore, in order to process/pay any new employee, we will need either one of these forms.

RIGHT TO WORK CHECK
The notes below are for your information and the link will advise you accordingly.  https://www.gov.uk/legal-right-work-uk

As an employer, it is your responsibility to ensure your employees have the legal right to work in the UK.  An employer who employs an illegal worker and has not undertaken a prescribed right to work check, will be liable for a civil penalty of up to £20,000 per illegal worker.  It is also a criminal offence to knowingly employ an illegal worker, or to employ a worker despite having reasonable cause to believe they may be illegal.   This offence could lead to a custodial sentence and an unlimited fine.

STUDENT LOAN THRESHOLDS
Plan Type 1 – £19,390 (9% over threshold)
Plan Type 2 – £26,575 (9% over threshold)
Postgraduate – £21,000 (6% over threshold)

STATUTORY MATERNITY PAY (SMP) – 39 PAID WEEKS
STATUTORY PATERNITY PAY (SPP) – 2 CONSECUTIVE PAID WEEKS ONLY
This will increase from £148.68 to £151.20 subject to qualifying earnings.
Eligible smaller companies will still be entitled to claw back 100% plus 3% compensation against their monthly PAYE/NI liabilities.  Larger companies remain at 92%.

STATUTORY SICK PAY (SSP)
This will increase from £94.25 to £95.85 subject to qualifying earnings.

DIRECTOR’S NATIONAL INSURANCE
For directors who pays themselves a monthly salary of £719, this has now increased to £732, with the increase in the secondary NIC threshold. Please note for the time being this increase will not apply to furloughed directors.

EMPLOYMENT ALLOWANCE
The employment allowance has been increased from April 2020 to £4,000 for eligible employers.
The following link provides further information relating to the employment allowance and your eligibilty – https://www.gov.uk/government/publications/employment-allowance-increases-for-national-insurance-from-april-2020/employment-allowance-increases-for-national-insurance-from-april-2020

NATIONAL MINIMUM WAGE
The hourly rates from 1 April 2020 will increase as follows:

25 and over £8.72
21-24 £8.20
18-20 £6.45
Under 18 £4.55
Apprentice £4.15

The apprenticeship rate only applies to apprentices aged:

  • Under 19
  • 19 or over who are in the first year of their apprenticeship

Apprentices aged 19 or over in their second year of apprenticeship must receive the national minimum wage or national living wage rate their age entitles them to.

AUTO ENROLMENT
There is no change to the auto enrolment pension contribution thresholds

Date effective Employer minimum contribution Staff contribution Total minimum contribution
6 April 2020 3% 5% 8%
6 April 2019 3% 5% 8%
6 April 2018 to 5 April 2019 2% 3% 5%

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We are in the process of sending out our annual P11D checklists summaries to our clients to gather information about any taxable benefits that may have been provided over the 2019/20 tax year.

What are taxable benefits?

If you provide certain benefits to any company employees or directors then they may generate a taxable benefit that need to be reported to HMRC.

Below are some examples of taxable benefits:

Ø  Business Mileage – if paid above HMRC approved rates

Ø  Company Cars & Vans

Ø  Interest free loan

Ø  Private medical / Dental insurance

Ø  Assets provided for personal use

Ø  Personal payments – e.g. school fees, gym membership, home phone charges

  

Ø  Company credit cards provided for personal use

Ø  Living Accommodation

Ø  Relocation Expenses

Ø  Trivial benefits – there are different limits for employees and Directors

Ø  Shares at less than Market Value

Ø  Mobile Phones

 

Business Mileage

If the company pays mileage for business use of a personal car ABOVE 45p per mile for the first 10,000 miles and 25p thereafter please provide details of the number of miles paid and the rate applied for each employee.

Company Cars

If company cars have been made available to employees or a member of their family to use privately, please let us know and we will request further details

Company Vans

If the company provided a van to employees or a member of their family to use privately and paid for the fuel.

Please note that personal use does not include:

  • Home to site trips that are exclusively for business (including very small detours such as to buy a newspaper)
  • Very few small, local personal trips such as to take a mattress to the tip (limited to no more than 2 per year)

Interest Free Loan

If an employee has been provided with a loan which exceeds £10,000 in the year then please let us know and we will request further details.

Assets provided for personal use

If employees are provided with assets which they can use for personal use (which are not listed elsewhere in this blog) please let us know and we will request further details.

This includes furniture provided in company accommodation.

Please note that this does not include:

  • The use of an asset where private use is not significant
  • 1 mobile phone per employee that is in the company name

Living Accommodation

If employees have been provided with living accommodation that is owned or rented by the company please let us know and we will request further details.

Relocation Expenses

If any expenses have been paid by the company for the relocation of an employee above £8,000 then please provide details of the amounts paid for each employee.

Mobile Phones

As above 1 mobile phone provided per employee that is in the company name is not a taxable benefit.

If you reimburse any calls that have been made on an employees personal mobile phone then this is a taxable benefit and we will need details of the amounts paid for each employee.

Trivial Benefits

There is a statutory exemption for ‘trivial benefits’ given to an employee.

A trivial benefit is one that:

  • Costs £50 or less to provide (including VAT)
  • If it is a retail store voucher that is not convertible into cash
  • Isn’t a reward for service e.g. Birthday, Christmas, Wedding anniversary etc.
  • Isn’t in the terms of the employee’s contract
  • Is not reimbursed

There is no limit on the number of trivial benefits that can be provided in the tax year for an employee.

Where the individual is a director of a close company the total value of trivial benefits cannot exceed £300 per annum.

Examples of common trivial benefits are:

Ø  Christmas Hampers

Ø  Fireworks

Ø  Vouchers for high street stores

Ø  Tickets to the theatre

Ø  Tickets to a football game

Ø  Wedding Anniversary champagne

 

How are these benefits reported?

Details of these benefits have to be entered into a software which will generate forms P11D & P11D(b).

A P11D is generated for each employee and needs to be distributed to each individual by the employer by 6th July 2020, the amount that is reported will be included in the employees’ tax code which will be updated once HMRC have received the submission.

A P11D(b) is generated for each company which reports the total taxable benefits from all employees. This has to be submitted to HMRC by 6th July 2020. There will be Class 1A NIC due on this amount which is calculated at 13.8%. This is payable by the employer and must be paid by 19th July 2020 (if payment is made via cheque) or by 22nd July 2020 if payment is being made electronically.

 

If you have provided any of the above items or have any queries then please contact us and we will be able to inform you whether anything needs to be reported to HMRC.

(E) enquiries@advaloremgroup.uk or (T) 01908 219100

 

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Updates to the Job Retention Scheme 

To confirm you can claim for furloughed employees that were on your PAYE payroll on or before 19th March 2020, that were notified to HMRC on an RTI submission. Employees on payroll that were employed as of 28th February 2020, but were made redundant or stopped working after that and prior to 19th March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.

We have now been updated on some of what can be included in the claim for the Job Retention Scheme grant.

In summary employers can claim apart from wages, the below:

  • Past Overtime
  • Fees and compulsory commission payments.

What is still not included:

  • Discretionary Bonus (including tips)
  • Commission payments and non-cash payments.
  • Non-monetary benefits including taxable Benefits in Kind.
  • Salary Sacrifice Schemes (including pension contributions), that reduce an employee’s taxable pay.

Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

For further information on:

  • Apprentice Pay
  • Apprenticeship levy and student loan
  • National Minimum wage

Please follow this link to the Government Guidance:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Please note: the government portal is not yet accessible and we await confirmation of the exact date this will be available. As soon as it is, we will provide further details.

Our payroll team are dealing with an unprecedented amount of calls at the moment so please bear with them if you are waiting for a call back. They are also dealing with the end of the tax year paperwork so where your query can be answered by another member of the team, we would recommend you speaking with your client manager in the first instance before calling the payroll team. Please be assured that your queries will always be answered.

Directors

There have been three main questions we’ve been focusing on when looking at the Job Retention Scheme for directors:

1.     Can directors be furloughed?
2.     Does this cause a problem with National Minimum Wage?
3.     Does this cause a problem with not having a contract?

After further clarification, our current understanding is that directors can be furloughed.

A director is not a “Worker” for the purposes of National Minimum Wage, as they do not have a contract of employment.

However, for furloughing purposes directors are included in the definition of employee (and employee and worker are not the same), therefore directors can be furloughed.

As a furloughed director, it is okay to continue with your statutory duties, e.g. filing accounts at companies house, but you must not work outside of the statutory duties. You cannot be marketing or continuing to try to generate income or future income for the business.

Directors who are furloughed are subject to all stipulations of the Job Retention Scheme.

Click here to see our most up to date COVID-19 Business Support Guide.

 

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This week the Government have announced they are investing £20 million for ambitious companies creating new technologies to aid building resilience following the Coronavirus outbreak.

The intention behind the investment is to drive the UK forward and promote innovation post COVID-19, with the aim to help boost the countries resilience to the long-term impact of the outbreak and similar situations in the future.

As a result, grants of up to £50,000 will be available to businesses operating in the technology and research sectors who are focussed on developing new ways of working. The areas the Government are looking to focus on are improving resilience in industries that provide to the population such as delivery services, food manufacturing, retail/transport and supporting those having to stay at home during periods of self-isolation.

Examples of innovations may include:

  • Developing technologies that allow retailers to react and thrive when they experience increased consumer demand and ways to improve their national delivery.
  • More personable services for families to be able to contact and check in with elderly or vulnerable relatives. This would provide a benefit to both the family and those vulnerable as it provides peace of mind.
  • Create further tools to improve remote education, allowing teachers to teach with the correct resources adapted to remote learning.

So far the UK have seen many businesses adapt to the Coronavirus outbreak and to continue to support the population in anyway possible. This new investment will further develop the UK’s support plan in preparation for potential future events which may result in the same outcome as we have seen in the past few weeks.

Any development proposals will be reviewed as part of a competition launched by Innovate UK. All projects will begin by June 2020 and will aim to last up to 6 months allowing the products and services to be available to the public by the end of 2020.

If you believe that you could qualify for the grant please contact us to discuss your R&D project so we can fully assess the financial support and tax reliefs available.

 

enquiries@advaloremgroup.uk or 01908 219100.