fpdteam, Author at Bennetts Accountancy

Involuntary “give-aways”

30th May 2023 by fpdteam

If you sell services, rather than supply goods, this usually involves you providing advice for a fee.

If your advice is sought after, the amount you can charge for your service(s) may be considerable. Which is why you should be wary of giving away your advice FOC.

Why would you do this? Why would you part with your hard-won expertise without charging a fee?

Perhaps you would be prepared to offer free advice if you are tempting a business prospect to join your customer list. And you may have clients who may be suffering a temporary downturn in activity, and you might be willing to offer pro-bono advice in limited amounts to help them through hard times.

The time to bite your tongue, and apply caution, is if a client reveals that they have a specific problem, and you can immediately see a fix. The urge to “blurt” out your solution will be irresistible but resist you must.

The skills you have acquired to provide the services you offer demand a return on this investment and giving away your solutions – whilst delighting your client – will defeat the object of you being in business.

Next time you are tempted in this way simply suggest that you may have a solution to their problem, but you will need time to check out a few details and promise to get back to them the following day. This will give you time to firm up your ideas and represent your pitch as an outline of what you can achieve, how this will benefit your client – and importantly – how much it will cost for you to deliver the solution.

Source:Other| 29-05-2023

Transfer of Business as a Going Concern

25th May 2023 by fpdteam

The transfer of a business as a going concern (TOGC) rules concern the VAT liability on the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

Where the sale of a business includes assets and meets certain conditions the sale will be categorised as a TOGC. A TOGC is defined as 'neither a supply of goods nor a supply of services' and is therefore outside the scope of VAT. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

All the following conditions are necessary for the TOGC rules to apply:

The assets must be sold as part of a 'business' as a 'going concern'. In essence, the business must be operating as such and not just an 'inert aggregation of assets'.
The purchaser intends to use the assets to continue the same kind of business as the seller.
Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
Where only part of a business is sold it must be capable of separate operation.
There must not be a series of immediately consecutive transfers.
There are further conditions in relation to transactions involving land.

The TOGC rules can be complex, and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this 'VAT' from the seller.

Source:HM Revenue & Customs| 22-05-2023

Clearance to secure exempt distribution status

25th May 2023 by fpdteam

Most payments a company makes to its shareholders, in respect of their shares, will be qualifying distributions and may be subject to Income Tax.

If certain conditions are met, the payment can be treated as an exempt distribution. An exempt distribution is a payment that is not treated as a distribution. It is treated as consideration for the disposal of shares and is subject to CGT.

When a company makes a purchase of its own shares, any excess paid over the amount of capital originally subscribed for the shares is usually treated as a distribution. However, there are special provisions that enable an unquoted trading company or an unquoted holding company of a trading group to undertake a purchase of its own shares without making a distribution.

In order to do this, a clearance application may be made. Under this procedure a company wishing to make a purchase of its own shares can obtain advance confirmation from HMRC that the distribution arising will be an exempt distribution.

If the application is approved, the payment is treated as consideration for the disposal of the shares in the hands of the seller and subject to CGT. Where entrepreneurs' relief is available, CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief. Where the necessary conditions are met a company purchase of own shares can be a tax efficient way of exiting a business.

Source:HM Revenue & Customs| 22-05-2023

Residence affects Income Tax in UK

25th May 2023 by fpdteam

There is an interesting anomaly that can affect taxpayers with homes in Scotland and other parts of the UK. Where this is the case, the question arises as to whether or not the taxpayer is liable to pay Income Tax in Scotland or elsewhere.

As a general rule, the Scottish rate of Income Tax (SRIT) is payable on the non-savings and non-dividend income of those defined as Scottish taxpayers. The definition of a Scottish taxpayer is generally focused on the question of whether the taxpayer has a 'close connection' with Scotland or elsewhere in the UK. The liability to SRIT is not based on nationalist identity, location of work or the source of a person’s income e.g., receiving a salary from a Scottish business.

Where a taxpayer has a home in Scotland and also elsewhere in the UK, they need to ascertain which is their main home based on published guidance and the facts on the ground.

HMRC’s guidance on the issue states the following:

Your main home is usually where you live and spend most of your time.
It does not matter whether you own it, rent it or live in it for free.
Your main home may be the home where you spend less time if that’s where:
- most of your possessions are;
- your family lives if you’re married or in a civil partnership;
- you are registered for matters like your bank account, GP or car insurance; and
- you are a member of clubs or societies.

It is also possible to change which home counts as your main home if there has been a material change in the underlying facts. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year.

Source:The Scottish Government| 22-05-2023

Gift aid tax benefits

25th May 2023 by fpdteam

The gift aid scheme, which was originally introduced in 1990, allows charities to reclaim from HMRC the basic rate of Income Tax deducted from qualifying donations by UK taxpayers. This means that when a basic rate taxpayer claims gift aid on a £10 donation, the charity can reclaim from HMRC the £2.50 of tax paid on that donation.

If you are a higher rate or additional rate taxpayer, you are eligible to claim additional tax relief on the difference between the basic rate and your highest rate of tax.

For example:

If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim back additional tax of:

£1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
£1,562.50 if you pay tax at the additional rate of 45% (£6,250 × 25%).

Taxpayers have the option to carry back charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as the previous year’s Self-Assessment return is completed.

This means that if you made a gift to charity in the current 2023-24 tax year that ends on 5 April 2024, you can accelerate repayment of any tax associated with your charitable giving. This can be a useful strategy to maximise tax relief if you are not paying higher rate tax in the current tax year but did in the previous tax year. This should be done as part of the Self-Assessment tax return for 2022-23 which must be submitted by 31 January 2024.

You can only claim if your donations qualify for gift aid. This means that your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year.

Source:HM Revenue & Customs| 22-05-2023

New patents service

25th May 2023 by fpdteam

The Intellectual Property Office (IPO) is the official UK government body responsible for intellectual property (IP) rights including patents, designs, trade marks and copyright.

The process of applying for a patent is set to change significantly over the next 12 months. The IPO has published a transformation document which sets out what patent customers can expect over the next 12 months, and details of upcoming changes to IPO’s services as part of the One IPO Transformation Programme.

The changes will start in September 2023 when the first new ‘One IPO’ service will launch a new patents search service. In addition, a new patents pilot will also start. This is expected to be followed in spring 2024 with the launch of the new One IPO patents service for all patents customers. This will include a new digital patents applications service, a new customer accounts service and the first APIs will be made available – allowing providers of IP software to link their products directly to IPO’s new systems.

Further changes are expected in the second half of 2025 including the launch of trade marks and designs services. Also expected is the introduction of a digital hearings and tribunals service.

The Minister for AI and Intellectual Property, said:

‘By delivering fast, flexible, high-quality services for the future, the ‘One IPO Transformation Programme’ will help the UK Intellectual Property Office deliver its ambition to be the best IP office in the world. I am excited to mark one year to go until the IPO’s new fully digital service for patents is launched.’

Source:Other| 22-05-2023

Claim a tax refund for work expenses

25th May 2023 by fpdteam

HMRC has issued a press release to remind employees that may be able to claim a claim tax relief for bills they pay that are related to their employment. The most recent figures show that more than 800,000 taxpayers claimed tax refunds for work expenses during the 2021-22 tax year with an average claim of £125. A claim can be made online by using HMRC’s online portal at GOV.UK.

A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. The flat rate deductions are set amounts that HMRC has agreed are typically spent each year by employees in different occupations. These deductions range from £60 to £1,022. If an occupation isn’t listed, employees can still claim a standard annual amount of £60 in tax relief if they pay their own expenses.

This means that qualifying basic rate taxpayers can claim back £12 (20% x £60) and higher rate taxpayers £24 (40% x £60) per year. Claims can usually be backdated for up to 4 years.

Employees may also be able to claim tax relief for other expenses such as using their own vehicles, professional fees, union memberships, subscriptions and for buying work-related equipment. As a general rule, there is no tax relief for ordinary commuting to and from an employee’s regular place of work.

HMRC’s Director General for Customer Strategy and Tax Design, said:

'Every penny counts, and we want to make sure employed workers are getting what they deserve – their hard-earned cash straight back into their pockets. To make a claim just search ‘employee tax relief’ on GOV.UK. It is the quickest way of getting a tax refund on your work-related expenses and ensures you get 100% of the money back.'

There is no tax relief available if an employee is fully reimbursed by their employer.

Source:HM Revenue & Customs| 22-05-2023

The importance of being interested

24th May 2023 by fpdteam

Conversation takes a turn for the worse if you have an opinion that your client has no idea how to solve their problem(s) and all they need to do is listen to your solution.

And you may be right in your interpretation of the facts, but will the client appreciate your apparent unwillingness to listen?

If AI systems ever crack this particular nut and develop the ability to listen, empathise and then advise, human advisors will quickly find themselves out of a job.

Being interested in your clients’ problems is different to knowing what they need to do to solve the problem. For instance, how is the problem impacting their stress levels, their family life. Have they been so worn down by their issues that their GP has prescribed anti-depressants?

Sometimes, we need to be heard, and communicating how we feel is as important as having the underlying problem solved.

As a bonus, if you are interested in your clients, they will return – and willingly – to share their difficulties and seek out your advice knowing that you really understand how they feel.

A simple process to exercise your empathic muscles is to ask open questions. It may take no more than a “How are you?” to create additional advisory fee billing opportunities.

Source:Other| 23-05-2023

Action to contain cost of living pressures – groceries

24th May 2023 by fpdteam

The Competition & Markets Authority has issued an update on the action it is taking to ease price rises in grocery bills. In their press release issued on 15 May 2023, the CMA said:

As cost of living pressures have grown, the CMA has been working to understand how well markets in essential goods and services are working. Along with road fuel, we identified groceries as an early priority, and we started work earlier this year looking into unit pricing practices online and instore.

While global factors have also been the main driver of grocery price increases, and at this stage the CMA has not seen evidence pointing to specific competition concerns in the grocery sector, it is important to be sure that weak competition is not adding to the problems.

Given ongoing concerns about high prices, we are announcing the stepping up of our work in the grocery sector to understand whether any failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market.

The prices that consumers pay for their groceries are the result of competition at three main levels of the market:

Competition between retailers, where consumers shop for their products.
Competition between suppliers who make the products and sell them to the retailers.
Competition between raw material providers who provide the inputs to food suppliers.

Given the need to provide findings swiftly, the CMA will do this work in a targeted way, focusing on those areas where people are experiencing greatest cost of living pressures.

This new phase of our work will therefore cover:

First, completing work to assess how competition is working overall in the grocery retail market, drawing on publicly available data and other information.
Second, in parallel, identifying which product categories, if any, might merit closer examination across the supply chain.

The CMA will engage with a wide range of industry participants, experts, and other stakeholder groups to inform our assessment. We will provide an update on this work over the coming months.

Source:Other| 23-05-2023

Tax on public transport season tickets

18th May 2023 by fpdteam

There are certain tax rules that it is important to be aware of where you pay for the public transport costs of your employees. The provision of public transport costs include:

season tickets provided for employees;
season ticket costs reimbursed to employees;
loans made to employees to buy season tickets; and
contributions to subsidised or free public bus transport.

If you are contributing to subsidised or free public bus transport there are no reporting requirements to HMRC, and you do not have to pay any tax or National Insurance on these costs. This is because there is a special exemption in place for subsidies to public bus services. For example, HMRC have confirmed that if you help finance a bus route that gives your employees free or reduced-rate transport between their homes and work or between workplaces, then no taxable benefit arises.

However, if the public transport costs are not exempt then the costs will need to be reported to HMRC with tax and National Insurance implications. This includes where season tickets are provided to your employees, where the cost of a season ticket is reimbursed or where a loan is made to your employee to purchase a season ticket.

Source:HM Revenue & Customs| 15-05-2023