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Self assessment deadline dates

HM Revenue and Customs must receive your tax return and any money you owe by the deadline.

The last tax year started on 6 April 2015 and ended on 5 April 2016.

Action                                                                         Deadline

Register for Self Assessment                                         5 October 2016

To submit Paper tax returns                                         Midnight 31 October 2016

To submit Online tax returns                                       Midnight 31 January 2017

Pay the tax you owe                                                     Midnight 31 January 2017

 

There’s an additional payment deadline of 31 July if you make advance payments towards your tax bill, known as ‘payments on account’.

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Does Auto Enrolment apply to you?

Is your staging date fast approaching and you have done nothing about it?

Automatic Enrolment applies to all employers who have at least one member of staff.  It doesn’t just apply to businesses – if you employ anyone to work for you like a cleaner or nanny for example, that makes you an employer and you will need to ensure that any eligible employees are enrolled into the workplace pension.

Setting up for Auto Enrolment doesn’t have to be costly and it pays to start planning as early as possible.  This gives employers time to research and shop around and helps avoid the risk of a £400 fine.  Recent research shows that most small and micro employers who have already met their pension duties recognise the importance of workplace pensions and think it is a good opportunity for their staff.

Not sure if you are an employer?

If you deduct tax and National Insurance from an employee, this usually makes you an employer. If you use an agency and the agency deducts the PAYE, this makes the agency the employer and you don’t need to do anything.

 

Not sure if your staff are “eligible”

If your staff are aged between 22 and State pension age and are earning more than £10k per annum, they are eligible and must be enrolled in to a scheme even if they chose to opt out later.  If your staff are younger or older or earning less than that they can still chose to join and you, as their employer may or may not have to contribute depending on the circumstances.

 

Your Business only has directors and no other staff?

You may be exempt from Auto Enrolment but you need to check.  If you are exempt you will need to tell the pensions regulator and give the reason why.

 

Already have a pension scheme you would like to use?

You need to check that it meets all the necessary conditions that will make it a “qualifying scheme” for Auto enrolment.  Contact your pension provider to find out.

 

Your staff earnings all full under the threshold?

You still have legal duties to meet.  For example, you will need to tell your staff about Auto Enrolment and complete and submit a declaration of compliance to the Pension Regulator to let them know what you have done to meet your duties

 

Do you need a pension scheme but don’t know where to start?

Not all schemes offer the same level of service and some charge more than others, so you should look at different schemes before you decide which is suitable for you and your staff.  The Pension Regulator has information on its website which can help you chose a Pension scheme with a list of providers who can offer pensions to small employers

 

What happens if you don’t complete the declaration of compliance on time?

Don’t leave your preparations to the last minute.  You will need to supply details of your pension scheme and the staff enrolled five months after you staging date.

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Construction Industry Scheme

Construction-SchemeWhat is the construction industry scheme?

Construction Industry Scheme (Often shortened to CIS) is a scheme put in place by HMRC in 2007 where contractors deduct a percentage of money from a subcontractors payments which is then passed on to HMRC.

The scheme only requires contractors to register however subcontractors are advised to register as unregistered subcontractors have a higher rate deducted from their payments.

 

Why should a Subcontractor register with the scheme?

Subcontractors are advised to register with the scheme to reduce the rate of deduction from their payments. Unregistered subcontractors must have 30% deducted from their payments whereas once registered, this is reduced to 20% deducted. Please note the contractor is liable for any errors within the deductions made and ensuring the subcontractor is verified.

 

How do I know if I am a contractor or subcontractor?

You are a contractor if you pay subcontractors for construction work and/or your business doesn’t do construction work but you spend an average of £1 million or more a year on construction within any 3 month period.

You are a subcontractor if you complete or aid completion of any construction work for a contractor.

 

How are the CIS Returns submitted?

All contractors must submit a monthly return to HMRC by 19th of each month. This return can only be submitted online via the HMRC website. If the return is nil this still needs to be submitted however this can be submitted on the phone.

When submitting the monthly return contractors must make sure throughout the month they have deducted the correct rate from their subcontractors. These subcontractors can be verify online where you will need their Unique Tax Reference (UTR), Trading Name, National Insurance Number (if they are a sole trader) OR Company Registration Number (if they are a limited company).

 

What if I miss the submission date?

If a CIS return is submitted late HMRC will issue a penalty depending on how late it is.

For any returns submitted later than this an additional penalty can be issued of £3000 or 100% of the CIS deductions on the return, whichever is higher.

 

When and how does a contractor pay this?

Once the monthly return is submitted by the contractor, the total of the deducted amounts must be paid to HMRC by 22nd of the SAME month (by 19th if you’re paying by post). This can be paid by any of the below.

  • Direct Debit
  • CHAPS
  • Online or Telephone Banking
  • Online Card Payment
  • BACS
  • Post
  • Cheque

 

What if subcontractors pay too much?

Contractors throughout the year must provide each subcontractor with a Payment and Deduction Statement. This statement should show a breakdown of what was submitted on the monthly return.

Sole Trader

  • If the subcontractor is a sole trader the CIS deductions are recorded on their Self-Assessment Tax Return.
  • HMRC will then work out your Tax and National Insurance bill for the year taking off any deductions suffered.
  • If tax is still owed then you must pay this by 31st If an overpayment has been made a refund will be issued by HMRC.

Limited Company

  • If the subcontractor is a limited company you will need to submit your monthly Full Payment Submission (FPS) as usual.
  • The subcontractor will then need to send in an Employer Payment Submission (EPS) at the end of the tax year showing all deductions suffered throughout the year.
  • HMRC will take the deductions off what you owe in PAYE and National Insurance

 

If you have any queries regarding this please feel free to contact us.

 

 

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Credit Control

What is Credit Control?

Credit control is a system of debt management which will allow a business to effectively monitor its cash flow.

Credit control will help a business to monitor which customers it will be able to give credit to (i.e. it will give credit only to those customers who are able to pay).  Credit control is also used to ensure that customers pay on time, thus preventing the business from developing cash flow problems.

Should credit control not be properly monitored, then the business could be affected by cash flow problems, either due to credit incorrectly being given to customers, or due to a lack of payments received.  This could potentially affect  the cash flow of your own business and thus potentially the success of your business, which is why credit control is so important.

Methods of Credit Control.

Prevention is one method of maintaining credit control.  If it is felt that a business may be heading towards cash flow problems, then a creditor may decide that stricter terms of credit control may be required.   This could be achieved by reducing the amount of credit allowed to the customer.  Another option would be to allow existing customers to pay by agreed instalments.  Early payment may also be encouraged by allowing a discount for early settlement.    Such discounts are normally around 2.5% of the invoice and the terms of the discount would need to be included in the content of the invoice.

It is important to have a clear strategy of credit control.

The first step in any strategy is to know the customer and to establish, from the outset, the terms of credit control.  It is then important to send the customer the initial invoice promptly.  It is also important to ensure that the initial invoice is correct. .If the invoice is not initially correct, then payment could be delayed whilst the customer queries any errors.

The invoice should be addressed to the correct person and contain details of the goods or service supplied, the date of the invoice, the invoice number,  the date that the payment is due and the terms of any credit allowed.  Bank details may also be included to allow payment to be made directly.   It is important to enable the process of payment to be as straightforward for the customer as possible so as to encourage prompt payment and to ensure that funds reach the business bank account quickly.  Payment by cheque, for example, may cause delay as the cheque has to be received, then paid into the bank account.   The funds will then need to be cleared.  Electronic payment can avoid these issues.

Once the initial invoice has been sent, then it will need to be monitored.  It is, therefore, important to be aware of then the payment is actually due.  The invoice may be followed up shortly afterthe date of issue with a courtesy call to confirm that the invoice has been received and to clarify the date that the payment should be expected.

If the invoice remains unpaid 28 days after being issued, then the customer should be called again to remind the customer that the payment is still outstanding. This call may be followed up by an email, again to remind the customer that the payment is due.

If the payment still remains outstanding, then a letter should be sent to the customer to advise that the payment is late.  The customer should be advised that as the payment is late, then interest may be charged on the debt under the Late Payment of Commercial Debts (Interest) Act 1998.

If the payment then still remains outstanding, then a further letter should be sent to the customer to advise that the debt may be passed to a debt collection agency.

Throughout the whole process of credit control, it is important to ensure that accurate records of any written correspondence are kept.  Any phone calls should also be logged.

It is possible to use an outside company for credit control.  The advantage of this is that the process of credit control can be followed professionally, but impartially, without the additional burden of personal interest.

If you have any further questions on credit control, then please do not hesitate to contact us at Harmonea.

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Key tax changes

Harmonea Update – Two key tax changes for 2016/2017

After all the hoo-haa of the recent budget, it’s sometimes important to remember that many things announced don’t take effect for a few years. We are about to be hit by two tax changes for last years budget – Dividend Tax Relief and Savings Credit.

Dividend Tax Relief

The changes to the tax regime announced in last years budget for Dividends will have an impact of anyone who owns a family company and uses dividends as a way of drawing money out or those who rely on substantial dividends in retirement.

What is changing? After Advance Corporation Tax (ACT) was removed by Gordon Brown in 1999 a system of dividend tax credit was introduced. As Dividends are paid out of Limited Companies taxed profits, there was no further tax to pay unless the dividends took you into the higher rate tax band in which case additional tax of 12.5% was charged.

The new rules mean that dividends are taxable in at 7.5%/32.5% or 38.1% depending on your ultimate tax band. The chancellor has given all tax payers a £5,000 allowance. To see the effect of this new tax in action, consider a business owner who wishes to withdraw £30,000 a year. Traditonally we would advise taking a salary up to the tax free limit of £10,000 and £20,000 of dividends. For 2015/16 this would result in an overall ni charge of £493.34 (although this can be reduced by £260.54 if you qualify for Employers Allowance).

In contrast for 2016/17 the combines tax & NI charge would be £1,543.34, the difference being the new £1,050 dividend tax. As you can see the effect is pronounced and if you are thinking of paying a dividend doing so before 6 April 2016 may be tax advantageous.

If you are unsure in any way of how you will be affected by this new tax, or if you can pay yourself a dividend please contact us.

 

Personal Savings Allowance

Another item introduced by Mr Osborne in last year’s budget was the concept of a Personal Savings Allowance. Basic rate tax payers will be able to earn £1,000 interest before paying tax. Higher rate tax payers have an allowance of £500. In order to earn £1,000 in a typical instant access account you would need over £75,000 saved. Bank and Building societies will start to pay interest gross without the deduction of tax.

Whilst this is no doubt good news for savers, please remember if HMRC send you a Notice to File A Tax Return you are required to do so to avoid an automatic £100 fine even if you have no tax to pay.

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Changes with the treatment of tax on dividends post 6/4/16

In the emergency budget in June 2015, the Chancellor announced that the treatment of dividends will change after 6th April 2016.  This will affect many shareholders who have up to now enjoyed sizeable dividends without any tax implication.

From 6th April 2016 the dividend tax credit will be abolished.  In its place will be a Dividend Allowance which is £5000 of dividend income will be tax free and for dividends over £5000 will be taxed at 7.5% for the basic rate tax payers, 32.5% for the higher rate tax payers (no change) and 38.1% for the additional tax payers.

For a shareholder with a £10,000 salary, in 2015 they would have dividends of £30,000 and pay £213 in tax.  The same £30,000  dividend under the new rule will result in a tax bill of £1800, an increase of £1587.

Taking dividends is still a tax efficient way of extracting profits from the company providing there profits to take.

If you need help on the best way to extract your profits, please talk to us.

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Tax on interest income

In the budget in June 2015, the Chancellor announced  he was giving a savings allowance of £1000 in interest received for each basic rate taxpayer from 6/4/16.  This is a saving of 10% on the 2015 rates.  As interest rates are so low currently, for directors that are owed money by your company for undrawn dividends, you could charge 4% interest on the amount owed and net yourself £1000 interest free providing you are a basic rate tax payer.

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When is the Self Assessment Deadline?

You have until 11.59pm on 31st January 2016 to submit your online self assessment tax return for the 2014/15 tax year, which ended on 5th April 2015, to HMRC. This is also the deadline to pay any tax due. If you miss the deadline you will be fined £100. This applies even if you don’t owe any tax or are due a refund!

You’ll need to submit a tax return if, in the last tax year:

  • you were self-employed
  • you got £2,500 or more in untaxed income, eg from renting out a property or savings and investments
  • your savings or investment income was £10,000 or more before tax
  • you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
  • you were a company director – unless it was for a non-profit organisation (eg a charity) and you didn’t get any pay or benefits, like a company car
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had income from abroad that you needed to pay tax on
  • you lived abroad and had a UK income
  • you got dividends from shares and you’re a higher or additional rate taxpayer – but if you don’t need to send a return for any other reason, contact the helpline instead
  • your income was over £100,000
  • you were a trustee of a trust or registered pension scheme

Harmonea Ltd can submit your tax return for you but don’t leave it to the last minute!

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