james.anderson, Author at James Anderson & Co

Company Tax Returns

Company Tax Returns – Job Retention Scheme and Eat Out to Help Out

If you received a Coronavirus Job Retention Scheme (CJRS) grant or an Eat Out to Help Out payment, you will need to do both of the following:

You should record all other taxable COVID-19 payments as income when you calculate your taxable profits.

Please talk to us if you require our help in disclosing grants and other support to HMRC. See: Corporation Tax forms – GOV.UK (www.gov.uk)

Here at James Anderson we specialise in tax and can help you complete your business tax return in compliance with HMRCs regulations. If you think this is a service that your company would benefit from, please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to help!

Making Tax Digital for income tax

Making Tax Digital (MTD) for income tax – Only 18 Months left to comply

Self-employed businesses and landlords with annual gross business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2024.

Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay taxes based on your business activity during the year. You can upload and update your tax account in real-time.

If you own a business or are self-employed and pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD-compatible software, and update HMRC at least quarterly via your digital tax account. Eventually, this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.

MTD for Income Tax should become law from 6 April 2024. It will initially apply to the self-employed and those who receive income from property, with gross income from these sources combined above a threshold of £10,000.

The government is running a pilot scheme where businesses can use the online service Making Tax Digital for Income Tax.

See: Sign up as an individual for Making Tax Digital for Income Tax – GOV.UK(www.gov.uk)

What should I do about MTD?

Talk to us – the good news is that you can reduce your running costs and streamline your accounting by complying with the new rules!

In the last two years, we have worked with many other clients to help them comply with MTD and streamline their accounting.

Just suppose you had a system where your bank feeds your data directly into your accounts on a DAILY basis and you can take a photo on your phone of a purchase invoice and it is posted automatically. You can see your results, who owes you money, who you owe money to and your business bank balance 24/7, 365 from your smartphone.

We have MTD-compliant cloud accounting packages that give you:

Please contact us about helping you to comply with the new rules. We are cloud accounting specialists and can train and support you with the right software. Please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to help!

Business Energy Bills

The UK Government has announced plans to help businesses with energy bills

Through a new Energy Bill Relief Scheme (EBRS), the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including UK businesses, voluntary sector organisations like charities and public sector organisations such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the EPG put in place for households

It will apply to fixed price contracts agreed on or after 1 April 2022, as well as to
deemed, variable and flexible tariffs and contracts. It will initially apply to energy
usage from 1 October 2022 to 31 March 2023, before a review is undertaken to
inform decisions on future support. The savings will be first seen in October bills,
which are typically received in November.

As with the EPG for households, customers do not need to take action or apply to
the scheme to access the support. Discounts will automatically be applied to bills.

See: Energy Bill Relief Scheme: help for businesses and other non-domestic customers – GOV.UK (www.gov.uk)

Household Energy Bills

The UK Government has announced plans to help households with energy bills

To provide immediate support for households, an Energy Price Guarantee (EPG) will cap the unit price that consumers pay for electricity and gas. This will mean the average household will pay no more than £2,500 per year for a period of two years from October 2022, and is expected to save at least £1,000 a year, although savings for individual households will vary according to their energy use. The discount is automatic and there is no need to apply or contact energy suppliers.

The EPG is in addition to the £400 support all households will receive from the Energy Bills Support Scheme (EBSS) over the coming winter.

The government will also provide an additional payment of £100 to compensate for the rising costs of alternative heating fuels for UK households not able to receive support for heating costs through the EPG, for example if they are living in an area of the UK that is not served by the gas grid.

See: Energy Bills Support Factsheet – GOV.UK (www.gov.uk)

Cash Flow

Let's talk about Cash Flow

Let’s talk about cash flow, one of the most important issues in many businesses…

Are you concerned about future trading conditions? If you are then it’s time to take some time to reflect on where you are and what could happen in the next few months.

Cash flow and business planning in these uncertain times may appear problematic, but there are some practical steps that you can take to minimise potential disruptions to your business:

Review your budgets and set realistic and achievable targets for the remainder of 2022 and into 2023
Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues
Review and flow chart the main processes in your business (e.g. sales processing, order fulfilment, shipping, etc.) and challenge the need for each step
Put extra effort into making sure your relationships with your customers are solid
Review your list of products and services and eliminate those that are unprofitable or not core products/services

At James Anderson + Co we specialise in helping our clients manage their cash flow, we do this by preparing and updating detailed cash flow forecasts by using the latest and most powerful software.

If you think this is a service that your company would benefit from, please get in touch through our contact page, or give us a call on 0131 440 1373, we’d be happy to help!

Business Loans Scotland

Business Loans in Scotland

This funding includes Business Loans Scotland, which is a consortium of Scottish local authorities. They provide loans ranging from £25,000 to £100,000 (and in exceptional circumstances, up to £250,000) to eligible businesses on behalf of the Scottish Government.

These loans can be used for a variety of purposes, including:

At James Anderson + Co, we help our clients stay on top of what loans they may qualify for. If you’re considering taking a loan out for your business, you may benefit from our impartial advice. Feel free to contact us via the contact page on our website or call us on 0131 440 1373.

See: Business Loans Scotland (find business support.gov.scot)

Tax E-News

Budget News

In the Chancellor’s second real Budget on 3 March 2021, he announced that he had to level with people about the state of the UK economy.

Rishi Sunak has chosen a fine line between raising taxes to start paying down the massive Government borrowings but at the same time stimulate economic recovery and save jobs. He was also mindful of pledges made in the Conservative Party manifesto not to raise income tax, VAT and national insurance. So that leaves corporation tax, CGT and inheritance tax. Maybe he will delay the announcement of significant increases in taxation until later in the year as it is anticipated that there will be a further Budget in the Autumn. By then the economy will hopefully have started to bounce back.

CJRS FURLOUGH SCHEME EXTENDED TO 30 SEPTEMBER

The current version of the furlough scheme that started on 1 November 2020 was scheduled to end on 30 April 2020. In order to avoid a “cliff-edge” with resulting widespread redundancies the chancellor has announced a further extension of the scheme and also a phased reduction in support to employers. The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working but it will then be limited to 70% for July and then 60% for August and September. This phased reduction will operate in a similar way as in September and October 2020 with the employer being required to contribute the remaining 10% and then 20% of an employee’s regular pay so that they continue to receive 80% pay for furloughed hours.

SELF-EMPLOYED INCOME SUPPORT GRANTS ALSO EXTENDED

In line with the further extension of the CJRS furlough scheme for employees the chancellor has also set out further support for the self-employed. We had been waiting for the details of the calculation of the fourth SEISS grant covering the period to 30 April and we now know that the support will continue to be 80% of average profits for the reference period capped at £2,500 a month and can be claimed from late April. There will then be a fifth SEISS grant covering the 5 months to 30 September.

The chancellor has also bowed to pressure to extend the scheme to include certain traders who were previously excluded. Thus, those who commenced self-employment in 2019/20 will now be included provided they had submitted their 2019/20 tax return by 2 March 2021. Conditions for the fifth grant will be linked to a reduction in business turnover. Self-employed individuals whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months average trading profits, capped at £2,500 a month. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £950 a month. We are awaiting further details of this fifth grant.

CORPORATION TAX RATES TO INCREASE TO 25% BUT NOT FOR ALL COMPANIES

The chancellor announced that this rate will increase to 25% from 1 April 2023 where profits exceed £250,000. However, where a company’s profits do not exceed £50,000 the rate will remain at the current 19% rate and there will be a taper above £50,000. Businesses will however be able to take advantage of new tax breaks to encourage investment in equipment and an enhanced carryback of losses.

SUPER-DEDUCTION FOR COMPANIES INVESTING IN NEW EQUIPMENT

In order to encourage companies to invest in new capital equipment, the chancellor announced a radical new “super-deduction” of 130% where they invest in the new plant (unused and not second hand). This would mean that when a company buys a plant costing £10,000 they would qualify for a £13,000 deduction in arriving at business profits. The new deduction, which will run for two years from 1 April 2021, will not be available for motor cars. Certain assets such as fixtures in buildings will only qualify for 50% relief in the first year instead of the normal 6% writing down allowance. Unfortunately, this deduction is not available for sole traders and partnerships.

THREE YEAR CARRY BACK OF TRADING LOSSES

Many businesses will have made a loss in the last year as a result of the Coronavirus pandemic and the difficult trading environment. Trading losses can normally only be set against profits of the preceding accounting period or previous tax year in the case of unincorporated businesses. The chancellor has announced that the carryback period will be temporarily increased to three years thereby enabling the business to obtain a tax refund. For companies, this will apply to loss-making accounting periods ending in the period 1 April 2020 to 31 March 2022.

For unincorporated traders, the extended loss relief will apply to losses incurred in 2020/21 and 2021/22. The amount of trading losses that can be carried back to the preceding year remains unlimited for companies. After carry back to the preceding year, a maximum of £2,000,000 of unused losses will then be available for carryback against profits of the same trade of the previous 2 years. There will be a similar £2,000,000 limit for unincorporated businesses.

INCOME TAX RATES

The Scottish Income tax rates for 2021/22 were previously announced in the Scottish Budget.

Starter rate from £12,570 – £14,667 19%

Scottish basic rate from £14,667 – £25,296 20%

Intermediate rate from £25,296 – £43,662 21%

Higher rate from £43,662 – £150,000 41%

Top rate over £150,000 46%

The personal allowance has been increased in line with inflation to £12,570 for 2021/22. This threshold will be frozen until 2025/26.

There had again been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. Note that the first £2,000 of dividend income continues to be tax-free.

NATIONAL INSURANCE RATES

The national insurance contribution (NIC) rates and bandings were announced on 16 December 2020 to take effect from 6 April 2021. Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,570 of earnings for 2021/22, an increase of £1 a week. The employee contribution rate continues to be 12% up to the Upper Earnings limit of £50,270, with the self-employed paying 9% on their profits up to the same level. Note that employer contributions will apply to earnings over £170 per week, £8,840 per annum which is also a £1 a week increase.

5% VAT RATE FOR FOOD, ATTRACTIONS AND ACCOMMODATION EXTENDED

In order to continue to support businesses and jobs in the hospitality sector, the reduced 5% rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK until 30 September 2021.

The 5% reduced rate of VAT will also continue to apply to supplies of accommodation and admission to attractions across the UK. From 1 October until 31 March 2022 the rate will be set at 12.5% and will then revert to 20% from 1 April 2022.

VAT REGISTRATION LIMIT FROZEN AT £85,000 UNTIL 1 APRIL 2024

The VAT registration limit normally goes up each year in line with inflation but will remain at £85,000 for a further two years. Arguably this makes it easier for businesses to assess whether or not they are required to register for VAT as it is no longer a moving target.

MAKING TAX DIGITAL EXTENDED TO ALL VAT REGISTERED BUSINESSES FROM 1 APRIL 2022

The government has confirmed that the requirement to maintain accounting records in a digital format and submit the data to HMRC electronically will be extended to all VAT registered businesses from 1 April 2022 regardless of the level of taxable supplies.

NEW RECOVERY LOAN SCHEME

The government have already announced a longer repayment period for “Bounce-back” and CBIL loans. From 6 April 2021, a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

Please contact a member of our team if you would like to discuss any of the issues raised.

Call: 0131 440 1373 Email: mail@jamesandersonca.co.uk