October 20, 2021
Topics  
by  Pradeepan Velayuthan

Has your VAT Direct Debit been cancelled?

Has your Direct Debit been cancelled between July and November 2021? HMRC have cancelled it because they do not have an email address for your business. If you want to pay using Direct Debit, you will need to set it up again using your Business Tax Account.

Why does HMRC need my email?

HMRC are now required to notify you in advance of any money being taken and email is the most efficient method to do this.

How do I know my Direct Debit has been cancelled?

If you have a Direct Debit set up with HMRC to pay your VAT, you should have received a letter in the post notifying you of these changes.

What do I need to do?

  1. Log in or create an online Business Tax Account via HMRC
  2. Log in and select your VAT card
  3. This should direct you to a step by step guide to set up a new direct debit
  4. Your new Direct Debit must be set up 10 days before your next VAT is due
  5. If you do not see instructions, please wait till the end of your current VAT quarter and try again

What happens if I do not provide an email?

Remember to give HMRC your email address along with your Direct Debit. If no email is used, HMRC will not collect your payment via Direct Debit and you could miss your VAT deadline. This could result in penalties.

Find more details below:

Pay your VAT bill: Direct Debit - GOV.UK (www.gov.uk)

Merry Christmas!

It is that time of the year again, but not like other years.

Christmas is not the same this year. Every year there are big celebrations and the whole country is upbeat during this festive period however this year, the UK is in a sombre mood.

The biggest culprit being Coronavirus but let us not forget Brexit too. There is a lot of uncertainties and the ban on gatherings (rightly so) has painted a glum picture during Christmas Celebrations.

However, there has been one gift granted by HMRC. No, it is not extra taxes nor is it April fools. HMRC have confirmed that Virtual Christmas party costs can be deducted from your Taxes. Please see below for further information.

Usually, entertainment costs are usually disallowed for Tax Purposes. An exception being that limited companies can host an annual party (or two) including Christmas party/dinner. These expenses can be deduced for your Corporation Tax.

The following rules apply:

  • It is an Annual Event – It is hosted once or twice a year and not every month or week
  • It is available for all company employees
  • The total cost per employee is capped at £150 – This includes Travel/Taxes/Food/Drinks and Entertainment
  • Aggregate on all events (if you have more than one event)
  • If this limit is exceeded on one single event, the whole cost is disallowed.

For more information, please click here.

Virtual Christmas Parties

2020 has been full of challenges and hosting a Christmas Party is near impossible. However, virtual parties have become the new norm. Many of you have decided to host your own Virtual Christmas Party. 

HMRC have confirmed they will allow the £150 exemption to Virtual Parties given the rules above are met.

The challenges concerning these are:

  • How do I prove everyone was invited?
  • What are the costs incurred?
  • Was it a Party?

It would be ideal to document the Christmas party if you plan on hosting one and claim it as an expense when filing your Corporation Tax.

Our suggestions to tackle these challenges would be:

  • Email the invitations to ALL your employees in a digital format – This will be trackable and make sure to keep a backup
  • Organise someone to be an entertainer or nominate someone to organise a quiz night or Karaoke
  • Record a section of your Virtual Party in a digital format, in case HMRC wants to audit it (You will have to get permission from all your staff to record it)
  • Send out a Christmas Hamper with food, drinks and Christmas goodies!
  • Enjoy the party without the worry of a hangover! We recommend a good shot!

These are OUR suggestions and not HMRC’s guidelines. Please click here for HMRC guidelines.

What can I do if I do not want to host a Virtual Christmas Party?

If you are not planning on throwing a virtual Christmas party, you can still give something little to your team. Please considering using the Trivial benefits options.

There are a few conditions, this can be deducted as an expense for Corporation Tax purposes. There are no tax impacts on the employees such as Benefit in Kind).

  • Cost of the benefit is £50 or less
  • The benefit is not cash or cash voucher
  • It is not a contractual obligation to provide this benefit
  • This is not provided in recognition of their services

If the benefit is provided to a director of a close company (or a member of their family or household) the benefit is limited to £300 per tax year.

Please click below for further information:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21864

https://www.gov.uk/expenses-and-benefits-trivial-benefits

We wish everyone a Merry Christmas and a healthy 2021!

On 29 May 2020, the government extended the Coronavirus Job Retention Scheme (CJRS). 

Furloughed Employees can now work part-time

Employees that have been furloughed due to COVID-19 will be able to have a flexible employment from the 1 July 2020. Employers will have the flexibility to allow their furloughed employees to work part time. Despite this change, the government will continue paying 80% of salaries of their normal hours that they have not worked until the end of August. 

The employer has control on the employment hours and the employer will be responsible for paying the full wage to their employee. There are no set requirements of the number of hours that an employee must work, this will vary depending on your business requirement. 

What must be done?

This new working arrangement between an employee and employer must be confirmed in writing. This agreement with an employee must cover at least one week and reported and claimed when the employer claims for the CJRS grant. You can make claims every fortnight or month, but you will be required to submit both the standard hours of the employee and the actual hours worked.

 If you have an employee who is unable to work or you do not have work to provide them, the employee can remain as furloughed and you can claim the grant under the current conditions.

Employer Contributions

There are a few changes that will change over the upcoming months regarding employer contributions.

June/July:

  • The government will pay 80% of wages up to a maximum of £2,500
  • Employer National Insurance and Pension Contributions will be covered for the hours not worked by the employee.
  • Employers will have to pay employees for the hours they have worked.

August:

  • The government will pay 80% of wages up to a maximum of £2,500
  • Employers will have to pay for Employers National Insurance and Pensions Contributions

September:

  • The government will pay 70% of wages, up to a maximum of £2,187.50 of the hours the employee does not work
  • Employers will be required to pay the 10% of wages to make up 80% of the total up to a maximum of £2,500
  • Employers pay National Insurance and Pension Contributions

October:

  • The government will pay 60% of wages, up to a maximum of £1,875 of the hours the employee does not work
  • Employers will be required to pay the 20% of wages to make up 80% of the total up to a maximum of £2,500
  • Employers pay National Insurance and Pension Contributions

If you are a smaller employer, some or most of your national insurance costs will be covered by the Employment Allowance.

CJRS – New Furloughed Employees

The Coronavirus Job Retention Scheme will close to new individuals who wish to be furloughed from 30 June 2020.

  • From 30 June, you will only be able to furlough employees who have been furloughed for a full three weeks prior to 30 June
  • The deadline for newly furloughed employees is 10 June to fit the three-week criteria

How to Claim?

Go to GOV.UK and search for Coronavirus Job Retention Scheme. Everything you need to know about this scheme is on GOV.UK

Self-Employment Income Support Scheme (SEISS)

  • The Self-Employment Income Support (SEISS) has also been extended similarly to CJRS.
  • Self-employed individuals who are eligible will be able to claim a SEISS grant in August.
  • The scheme will be targeting towards individuals who have been affected severely by COVID-19 and the criteria will be the identical as the initial grant.
  • To be eligible for the second grant, you do not have to claim the first claim.
  • The taxable grant will be 70% of your average monthly profits for three months. This will be a maximum of £6,570 and paid in one instalment.
  • On 13 May 2020, the first SEISS was introduced and the deadline to claim this falls on 13 July 2020.

How to Claim?

The eligible self-employed individual must make this claim themselves. HMRC will then calculate the grant you will receive

More information regarding the second grant will be available on 12 June but in the meanwhile, GOV.UK has the most recent and regular information regarding this scheme.

https://www.gov.uk/government/organisations/hm-revenue-customs

On 26 March 2020, the government introduced a new scheme called Self Employed Income Support Scheme (SEISS) to provide aid for individuals who are self-employed. A member of partnership can also claim this scheme. The scheme is now open to those who have been impacted by COVID-19 and have annual profits of less than £50,000. Half of their income should also be obtained from self-employment.

If the conditions are met, the SEISS will provide a grant value:

  • 80% of the average monthly trading profits
  • Capped at a total of £7,500
  • For a duration of three months

The scheme may be prolonged if circumstances change.

Who do I Contact?

HMRC will contact you directly if you are eligible for the scheme. From the 4 May 2020, HMRC have been contacting individuals who are eligible for SEISS and you will be asked to claim online using the GOV.UK Online Service.

HMRC will calculate how much an individual can claim and then you will have to make the claim to receive the fund.

You can go online to check if you are eligible for this scheme by clicking here.

You will need the following to check if you are eligible:

  • Unique TaxPayer Reference (UTR)
  • National Insurance Number

Am I Eligible for SEISS?

You must be either self-employed or a member of a partnership

  • You carry on a trade that has been impacted by COVID-19
  • You have traded in the Tax Years 2018-19 and 2019-20
  • Your Self-Assessment Return for the Tax Year 2018-19 has been filed on or before 23 April 2020
  • You expect to remain trading in the Tax Year 2020-21
  • You meet the profit criteria

The profits criteria are met if:

  1. For the Tax Year 2018-19, your trading profits were:
  • 0 < Profit < £50,000 and
  • At least equalising to your non-trading income for the same tax year

2. You traded in each of tax years 2016-17, 2017-18 and 2018-19 and:

  • 0 < Average profits for the years < £50,000 and
  • The total profit was at least equal to your non-trading income for those years

3. You traded in the Tax Year 2017-18 and 2018-19 and not 2016-17 and:

  • 0 < Average profit for the two tax years < £50,000 and
  • The total profit was at least equal to your non-trading income for those two tax years

Who is not eligible?

  • If you started your trade after 5 April 2019
  • Your Self-Assessment Return for the Tax Year 2018-19 has not been submitted by 23 April 2020
  • If your trading income is less than half of your overall income
  • You operate a Furnished Holiday Letting business

How Do I Claim if I am Eligible?

The online claim scheme is expected to open on 13 May 2020 however, an alternative method will be provided for those who cannot claim online.

You will be using the GOV.UK online service to make complete this claim, and you will need the following:

  • Your Unique Taxpayer reference (UTR)
  • Your National Insurance Number
  • Your Government Gateway user ID and password
  • The details of the bank account you want the grant to be paid into

Frequently Asked Questions

Can we make your claim for you?

  • Unfortunately, we cannot. As agents we can only assist you to check if you meet the criteria of this scheme, however, the claim must be completed by you.

How long do I have to wait for the claim to be approved?

  • As you file the claim, you will be told straight away if the claim has been approved. You will be notified how much you are eligible for and how this has been calculated.

How long do I have to wait for the payment?

  • Once approved, the payment will be made to the bank account you have provided within six working days as a single instalment.

What do I need to do after the claim?

  • Please ensure that you keep a clear record on the amount being claimed, reference number and any evidence that shows your business has been impacted by Coronavirus

Am I eligible if I have more than one income stream?

  • If your trading income accounts for half or more of your overall income, you are eligible.

I do not have a Government Gateway Account, what do I do?

  • Please click here to set up your government gateway account.

Please contact us for further information.

FIVE Important Steps Business Owners must take to prepare for the COVID-19 Pandemic Praddy Financial Consultancy

COVID-19 has caused unprecedented business interruption and lots of businesses are not prepared to face this unexpected business interruption.

Prevention is better than cure; and if your business is not prepared to handle the current crisis, it could be fatal to the business.

Be sure to work closely with your advisory team (internal and external), your finance team, mentors, industry colleagues; and plan how to be resilient during this difficult time.

Here are Five IMPORTANT things you should be focusing on right now:

1.    Safety of your team

More than anything safety of your team is paramount. Make sure they are protected during this pandemic. Educate the team how to stay safe during this pandemic and set up remote working and avoid non-essential travel.

Set up regular calls and online meetings to keep the team motivated and look after their mental health.

2.    Plan your cash flow

Cash is king and the lifeblood of any business. Do you have a cashflow forecast for the next 12 months? Cashflow forecast will provide you with a good indication how long your business can survive with the downturn in sales and what you should do for the survival of the business.

a.    Contact your suppliers and creditors and try to negotiate payment flexibility. During this difficult time, many suppliers will agree to extend their payment terms.

b.    See how you can reduce your monthly overheads

·     If you are paying for any services that are not important to the business, consider cancelling them

·     Re-negotiate your costs with your suppliers

·     Consider whether you can freeze your monthly cost if the service is not used by the business during the period

·     Re-consider your budgets – For example if you are not selling your products or services during this period you may consider reducing your marketing budget.

c.    Business Rates:

·     Check you are qualified for the business rate relief if not speak to your local council and request a payment holiday.

d.    Cash Grants:

·     Government is offering cash grants for small businesses which occupies a property. Keep an eye on the letters from the council regarding this grant. Some local councils have requested the clients to complete an online form to claim this grant.

e.    Rent:

·     Speak to your landlord and check on a payment holiday

·     Government has confirmed that commercial landlords cannot evict the client for unpaid rent up to 3 months.

f.     Furloughing:

·     If you must close your business due to COVID-19, consider furloughing your employees.

·     Government has confirmed they will cover 80% (maximum of £2500) of the salaries for the furloughed staff.

·     It’s important not to lose your key employees and protect their value to the business and you will need them even more when this pandemic is over.

g.    Check with your Bank on the financing options available:

You should be in regular contact with your banks and get the best financing plan in place so the business can survive during this difficult time. You should discuss what type of financing is required depending on your company’s needs, for example:

·     Overdraft – if you need finance for short term

·     Bank Loan – if you need financing for a long term

·     Invoice finance – If your customers are taking more time to pay

·     Asset Finance- if you are looking to purchase a business asset  

3.    Insurance

Does your insurance policy cover business interruption and loss of profits? Please make sure you check with your Insurance provider what is covered. If you are not already covered for the business interruption and loss of profits, there is nothing much you can do at this point. However, it’s worth making a note and discuss this when your insurance is due for renewal. This is not the first-time businesses are affected by a pandemic and possibly the last time either.

4.    Cyber Security

More and more people have started working remotely due to the lockdown and there are lots of emails and information available in regard COVID 19. Cyber criminals are very busy during this period targeting vulnerable individuals and businesses. Cyber security is quite important during this period, and following are few precautions you must take,

·     Make sure all the computers have up to date Anti-Virus software

·     Take special care on emails and be super vigilant when opening suspicious links

·     Password protect your computers

·     Activate 2-factor authentication whenever possible

·     Use of VPN links to access secure data

5.    Brainstorming

The leadership team should be in regular communication to discuss how to handle the business during this crisis and survive unscathed through not only the pandemic itself but the likely recession that will follow.

6.    Look for opportunities

Lots of businesses may crash during this pandemic. It’s expected nearly one million businesses will be closed during this pandemic. It’s not always bad news as there are some businesses, they do thrive during situations like this. So, please prepare yourself and look for opportunities and there will be always light at the end of the tunnel.

Good luck and take care of yourself and one another.

How does Statutory Sick Pay (SSP) work for Coronavirus?

Coronavirus has become a pandemic it is becoming a growing concern for the world. The UK government have set a guidance on Coronavirus (Covid-19), but we are here to answer a few questions that you might have.

The UK 2020 budget has been set and there have been a few changes, this includes a temporary change to the Statutory Sick Pay (SSP).

Should I self-isolate?

If you believe you have symptoms of COVID-19, even mild, please stay at home and do not leave your house for 7 days. From the 13th of March 2020, individuals who have been advised to self-isolate will be covered by SSP.

What is the current rate for SSP?

The current rate is £94.25 each week but this increases to £95.85 from the 6th April 2020.

How does SSP work?

SSP will be payable from the first day rather than the fourth day for affected individuals. This includes individuals who are not ill but unable to work due to self-isolation.

Do I need a sick note to be eligible for SSP?

You do not need a note from your GP or Doctors regarding COVID-19. Instead, you’ll be able to obtain one from NHS 111 if you require a note.

What happens if I am not eligible for SSP?

If you are an individual who is not eligible for SSP, for example if you are self employed or someone earning below the lower earning limit (£118 per week or £512 per month), you can make a claim for Universal Credit or Contributory Employment and Support Allowance.

Information regarding SSP for Employers

If you are a small or medium sized business or employer (less than 250 employees), the government intend to fund your extra costs related to Covid-19 SSP. This includes refunds for business who have employees who have claimed SSP due to Covid-19. Employers are still asked to record absences. However, there is no need to obtain a GP or Doctors fit note, instead one can be obtained from NHS 111.

If you require more information, please click here

Companies House – Late filing penalties

A penalty notice is issued by Companies House when a limited company does not file the statutory accounts with companies house on time. The penalty notice will be issued as soon as the accounts is filed, and the scope of the penalty depends on how late the accounts are filed.

The table below gives you an idea on the penalty:

Delay of the Filing Accounts Private Company & LLP (£) Public Company (£)
< 1 month £150 £750
1 > 3 months £375 £1,500
3 > 6 months £750 £3,000
6 months > £1,500 £7,500

The penalty can be paid in various ways and the quickest methods include sending a cheque or using the BACS payment methods. There are alternatives provided on the letter with full details on how to complete this payment.

If the penalty is not paid on time, Companies House may instruct debt collectors to recover the penalties due and the company may end up receiving a CCJ (County Court Judgement) or bailiffs at the door.

Appeals

You can appeal against a penalty if you believe that this was undeserved. However, appeals are only successful if you can prove that the circumstances are exception such as an unforeseen tragedy.   

What is not an exception?

  • You cannot afford to pay
  • You relied on your accountant
  • This is your first accounts
  • Your company is dormant

A full copy of what is exception and further details can be found on: www.gov.uk/companieshouse

Considering the level of penalties, you may be liable, we would advise to file the Accounts on time. It’s the responsibility of the director to ensure the Accounts is filed on time and a qualified accountant can assist you in filing the correct accounts on time. If you need any assistance in regard to your companies house accounts, please get in touch.

I use my personal phone and home internet for my Limited company - Can I claim the full or part of of mobile bills as an expense the VAT on it?

Telephone / Mobile Costs

If the Mobile contract you can claim the 100% cost of the bill and the VAT as an expense. Even though there could be personal use of the mobile, the company or employee does not have to pay any Benefit in Kind taxes (BIK).

However if the Telephone / Mobile contract is in the employee’s name, it gets little complex.  So, if the employee use their personal mobile phone to make a business call only the actual call cost necessarily incurred for the business can be claimed as an expense and not the line rental. Please see the example provided by HMRC.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32951

A construction engineer often works out of the office on construction sites. She uses a mobile phone so that she can keep in touch with the office. The phone is mainly used for business calls.

The tariff for the mobile phone includes up to 10 minutes of free calls each month. In one month she pays £22, which is the rental charge only, because her total calls, all of which were business calls, amounted to 8 minutes. No deduction can be permitted because no expense has been incurred in making the business calls.

The following month she pays £28, which is £22 for rental and £6 for calls. Calls that are charged are paid for at a rate of 20p per minute. In the month she made calls totalling 40 minutes, of which 30 minutes were for business and 10 minutes were private. A deduction should be permitted for the cost of business calls, see EIM32945. The amount that can be deducted is £4.50, which is 75% of the call charges, because 75% of the total call time was made up of business calls.

We recommend to have the mobile contract in the company’s name to claim 100% of the mobile cost and to enjoy the tax free benefit.

In the meantime, if the employee have two mobile contracts and one mobile is used 100% for the business purpose, then this cost can be claimed proven it’s used only for business use. 

Broadband

As far as Broadband costs incurred by the employee at home, if the employee is already paying for a broadband contract, the employer cannot reimburse the cost as there will be no additional cost to the employee for using it for business. If the employer decides to reimburse the broadband cost, this will be subject to PAYE and NIC.

In the meantime, if the employee does not already pay for a broadband internet connection at home, and needs one in order to work from home then this cost can be reimbursed by the employer without any PAYE or NIC implications. 

Please refer HMRC’s guidance here

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim01475

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